Post Tagged with: "carry trade"
China slams U.S. for inflating global asset prices via carry trade
On the eve of U.S. President Barack Obama’s visit to China, a major Chinese official has criticized U.S. monetary policy in unusually harsh language. Liu Mingkang, China Banking Regulatory Commission chairman said the zero interest rate policy of the U.S. Federal Reserve posed a “new systemic risk.” Liu, using language reminiscent of warnings by NYU
Hong Kong: “America is doing exactly what Japan did last time”
Hong Kong’s leader Donald Tsang has come out with a scathing criticism of U.S. monetary policy, comparing it to Japan’s which he believes contributed to 1997’s Asian crisis. This is the most direct and strident criticism of the U.S. Federal reserve’s monetary policy from a major international politician yet. Bloomberg reports: The Federal Reserve’s policy
Is the U.S. dollar carry trade replacing the one in Japanese yen?
Nouriel Roubini seems to think so. In remarks quoted via Bloomberg, he called the enormous increase in asset prices “the mother of all carry trades.” Investors worldwide are borrowing dollars to buy assets including equities and commodities, fueling “huge” bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini. “We have
The Dollar Carry Trade
One other reason to sell the dollar is interest rates. Why not borrow in dollars where interest rates are low and invest elsewhere where yields are high? This is what is known as the carry trade. In the past decade, the Japanese yen and the Swiss franc were favorites for the carry trade because of
Quantitative easing: printing money like mad to ward off deflation
In economic circles, there has been a lot of buzz about Quantitative Easing of late. Basically, the U.S. Federal Reserve has lowered interest rates to near zero percent and the fear is that these cuts will not have enough effect on the willingness to lend in order to reflate the U.S. economy. Therefore, the Fed has decided to take more draconian measures, one of which is Quantitative Easing, flooding the economy with money
The emerging markets crisis
Last night an article by Niels Jensen of Absolute Return Partners caught my eye. In it, he made a very strong case for worrying about European bank exposure to emerging markets and its potential for creating systemic risk. I would like to share some highlights from this well-written piece and add a few thoughts of
Reverse carry trade borrowing is deadly
By now, you are familiar with the carry trade, where one borrows in one’s own currency in order to invest in higher yielding foreign assets, often times with significant leverage. The Japanese were famous for making this trade in Australian Dollars, U.S. Dollars, you name it. What a lot of people don’t realize that everyone
The carry trade unwinds and it’s not pretty
Just as Japan is starting to unwind its carry trade, a new one might be forming in the form of 1% base rates in the United States. The carry trade was very popular amongst Japanese retail investors, especially using leverage (see article – hat tip Yves Smith). But, this trade unwound in a vicious way
Chart of the day: Aussie – Yen cross
Of the major currencies, the Japanese Yen has been the strongest in the last few months, while the Australian Dollar has been the weakest. These two currencies have also been the most conspicuous in the Japanese carry trade. That trade is now coming unstuck, precipitating changes of epic proportions. For those of you who don’t
Chart of the day: Japanese Yen
Although off its highs for the day, the Japanese Yen is still looking very strong against every major currency. Earlier, it pushed as high as 92 yen to the dollar. Jim Rogers was on Bloomberg saying it was headed much higher
Chart of the day: US Dollar
Something dramatic is happening in the currency markets. I commented on this in my post “US Dollar rising dramatically.” These currency moves are related to international dollar debt, the carry trade unwind and expected interest rate cuts due to slow growth
US Dollar rising dramatically
The U.S. Dollar is rising once again. As the realization kicks in that the U.S. will not be alone in its economic struggles, currency traders are making major bets that interest rates will fall outside of the U.S. across the board. The British Pound, the Euro and the Canadian Dollar have all been losers. The