Backwardation/Contango and Currencies

Discussion in 'Trading' started by Reaver, Jan 20, 2008.

  1. I was wondering if anyone could help out with this...

    I know that backwardation in a commodity can indicate a shortage or tightening supply....but when a currency future is in backwardation, what does this indicate?

  2. Vorpal


    The carry on FX futures is mainly a function of the relative interest rates between the two currencies.

    US interest rates are > Japanese rates, so the yen futures are currently contango.

    US interest rates are < mexican rates, so the peso futures are in backwardation.
  3. Thanks for the info.