# FX Carry Trade Monitor — Phase 182 ✅
**Status:** Complete (467 LOC)
**Category:** FX & Crypto
**Data Sources:** FRED API (3-month interest rates), Central Bank Policy Rates
## Overview
Monitor interest rate differentials and identify carry trade opportunities across 10 major currency pairs. Calculate risk-adjusted carry returns using interest rate differentials and FX volatility.
## Features
### Carry Trade Logic
- **Borrow** in low-yielding currency (funding currency)
- **Invest** in high-yielding currency (investment currency)
- **Profit** = Interest Rate Differential - FX Depreciation - Transaction Costs
- **Risk-Adjusted Carry** = Rate Differential / FX Volatility (Sharpe-like ratio)
### Supported Currencies
- USD (US Dollar)
- EUR (Euro)
- JPY (Japanese Yen)
- GBP (British Pound)
- AUD (Australian Dollar)
- CAD (Canadian Dollar)
- CHF (Swiss Franc)
- NZD (New Zealand Dollar)
- SEK (Swedish Krona)
- NOK (Norwegian Krone)
### Data Sources
- **3-Month Interest Rates:** FRED API interbank rates (IR3TIB01XXM156N series)
- **FX Spot Rates:** FRED daily FX rates vs USD (DEXUSXX series)
- **FX Volatility:** Calculated from 90-day daily return standard deviation (annualized)
## CLI Commands
### 1. Carry Trade Opportunities
```bash
python cli.py carry-opportunities [min_differential]
```
List all carry trade opportunities with rate differentials above threshold (default 1.0%).
**Output:**
- Currency pair
- Funding vs investment currencies
- Interest rate differential (annualized %)
- FX volatility (annualized %)
- Risk-adjusted carry ratio
- Expected annual carry return
### 2. Rate Differential
```bash
python cli.py carry-differential USD JPY
```
Calculate detailed rate differential and carry trade metrics between two currencies.
**Output:**
- Current 3-month rates for both currencies
- Rate differential (absolute and directional)
- Recommended carry trade direction
- FX spot rates
- FX volatility
- Risk-adjusted carry
### 3. Carry Dashboard
```bash
python cli.py carry-dashboard
```
Comprehensive overview of global carry trade landscape.
**Output:**
- Total opportunities count
- Average carry of top 5 trades
- Average risk-adjusted carry of top 5 trades
- Best funding currencies (lowest rates)
- Best investment currencies (highest rates)
- Top 10 carry opportunities sorted by risk-adjusted carry
### 4. Top Funding Currencies
```bash
python cli.py carry-funding [n]
```
Get currencies with lowest interest rates (best for borrowing/funding).
### 5. Top Investment Currencies
```bash
python cli.py carry-investment [n]
```
Get currencies with highest interest rates (best for investment side).
## MCP Tools
All CLI commands are exposed via MCP protocol:
- `fx_carry_opportunities` — Identify carry trade opportunities
- `fx_carry_differential` — Calculate rate differential between two currencies
- `fx_carry_dashboard` — Full carry trade market overview
- `fx_carry_funding` — Top funding currencies
- `fx_carry_investment` — Top investment currencies
## Example Output
### Carry Dashboard
```json
{
"timestamp": "2026-02-25T11:30:00",
"summary": {
"total_opportunities": 18,
"avg_carry_top5": 3.45,
"avg_risk_adjusted_top5": 0.412,
"best_funding_currencies": ["JPY (0.12%)", "CHF (0.85%)", "EUR (1.22%)"],
"best_investment_currencies": ["NZD (5.50%)", "AUD (4.85%)", "GBP (4.25%)"]
},
"top_opportunities": [
{
"pair": "JPY/NZD",
"funding_currency": "JPY",
"funding_rate": 0.12,
"investment_currency": "NZD",
"investment_rate": 5.50,
"rate_differential": 5.38,
"fx_volatility": 12.4,
"risk_adjusted_carry": 0.434,
"annual_carry_pct": 5.38
}
]
}
```
### Rate Differential
```json
{
"currency1": "JPY",
"currency1_name": "Japanese Yen",
"currency1_rate": 0.12,
"currency2": "AUD",
"currency2_name": "Australian Dollar",
"currency2_rate": 4.85,
"rate_differential": 4.73,
"carry_trade_direction": "Borrow JPY, Invest AUD",
"annual_carry_pct": 4.73,
"fx_volatility": 11.2,
"risk_adjusted_carry": 0.422
}
```
## Risk Considerations
**Note:** Carry trades are NOT risk-free arbitrage. Key risks:
- **FX Depreciation:** Investment currency can depreciate faster than carry earned
- **Volatility Spikes:** FX volatility can surge during market stress (e.g., risk-off events)
- **Correlation Breakdowns:** Carry trades often blow up simultaneously in crisis
- **Interest Rate Changes:** Central bank policy shifts can reverse differentials
## Data Requirements
**FRED API Key:** Required for live data. Without API key, module structure works but returns empty results.
To configure:
```python
FRED_API_KEY = "your_fred_api_key_here" # In modules/fx_carry_trade.py
```
Get free API key: https://fred.stlouisfed.org/docs/api/api_key.html
## Integration
✅ Module created: `modules/fx_carry_trade.py` (467 LOC)
✅ CLI commands registered in `cli.py`
✅ MCP tools added to `mcp_server.py`
✅ Roadmap updated: Phase 182 marked as "done"
## Next Steps
- **Phase 183:** FX Volatility Surface — Implied vol for major pairs, risk reversals, butterfly spreads
- **Phase 184:** EM Currency Crisis Monitor — FX reserves, current account, real effective exchange rates
- Add carry trade backtesting (historical carry returns vs realized FX moves)
- Integrate with portfolio allocation (optimal carry trade sizing)
- Add carry trade unwinding alerts (volatility spikes, correlation breakdowns)
