Monthly FX Carry: Long High-Rate and Short Low-Rate Currencies

Summary

This QuantConnect example describes a monthly currency carry strategy. It ranks a universe of currency futures by associated central bank or interbank rates, goes long the three highest-rate currencies, and shorts the three lowest-rate currencies. Unused cash is described as earning overnight rates, while futures positions use leverage. The sample links eight futures contracts to rate series and includes a custom trading fee model.

The implementation checks that rate observations are recent before ranking, and only rebalances when futures data arrives in a new month. It closes holdings that are no longer selected and assigns equal target weights within the long and short groups. The document provides code for data loading and execution, but no backtest results or evidence that the strategy is profitable. Its practical limits include the small specified universe, reliance on rate data freshness and external data sources, and the absence of discussion of transaction costs beyond the sample fee, currency risk, or portfolio risk controls.

Key ideas

• The strategy ranks currencies by their associated interest rates and rebalances monthly.
• It takes long positions in the three highest-rate currencies and short positions in the three lowest-rate currencies.
• The example uses currency futures with leverage and includes a custom fee model.
• Rate observations are used only when they are no more than 31 days old.
• The document provides implementation details but no performance evaluation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.