Investors who formulate their currency strategies based on the fundamental health of a currency are less prone to crash risk then those who engage in carry trades, according to research published by the International Monetary Fund (IMF) at the beginning of February.

Carry traders, who take short positions in currencies with low rates and long positions in currencies with high rates, enjoy a high ratio of reward to risk, the authors note. However, their returns are negatively skewed, and "subject