The latest down-move on the Aussie overnight has highlighted the increased deterioration we’ve seen in carry currencies in the past 2-3 weeks, enhancing the underlying trend seen since April. AUD/JPY best reflects this, with the key carry cross now threatening to break below the 72.20 low marked out in 2010. Taking a wider look at the carry trade, it’s notable just how badly it is now performing, even though we are living in a world with zero interest rates in several major currencies and plenty of carry opportunities beyond those shores. For anyone invested in a simple basket of Aussie, Kiwi, Turkish lira and Brazilian real, funded via the yen, the latest moves in these currencies would have wiped out the profit made over the past twenty-eight months, with the move in these currencies since April resulting in a 20% loss. Furthermore, the way things are panning out we are entering a phase when the dynamics of the carry trade could well be changing on a more permanent basis. Traditionally, carry trades have been characterised by long periods of gains, followed by short period of losses. In the period from 2000 to October 2007, a simple carry basket yielded gains in 66% of the months. From November 2008 to now, that figure falls to 49%. In other words, the dynamics of the carry trade have undergone a major readjustment, which could well call into question its longer-term use in currency trading strategies.