| Author |
 Topic  |
|
|
Country
1000+ Penny Miser Member
USA
3121 Posts |
 Posted - 11/08/2009 : 13:01:13
|
The International Monetary Fund said traders are probably using the dollar to fund “carry trades” around the world and the currency may still be overvalued even after its slide this year.
You must be logged in to see this link.
Look for further USD weakness soon. GOLD and other metals and commodities will benefit.
Notice that our government is very quiet about the USD depreciating. No strong words anymore about how they are for a strong USD. I think this is a clarion call/signal by other world economies to be telling the worldwide markets to expect a weaker USD very soon. I believe all this has been planned and agreed upon.
|
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
|
Edited by - Country on 11/08/2009 13:08:05 |
|
|
dakota1955
1000+ Penny Miser Member
2212 Posts |
Posted - 11/08/2009 : 15:14:56
|
| Never heard of carry trades. |
 |
|
|
Country
1000+ Penny Miser Member
USA
3121 Posts |
Posted - 11/08/2009 : 15:36:18
|
Currency Carry Trade
A carry trade where you borrow and pay interest in order to buy something else that has higher interest. For currencies, it might be that you borrow in Yen [the USD is now the currency of choice with 0% rates] (where the interest rate might be low) and use the proceeds to purchase U.S. dollar long term debt[institutions are now buying foreign sovereign bonds with much higher interest rates]. While the trade might produce a positive return, it is risky in two dimensions. First, U.S. rates could increase diminishing the value of the bond you purchased. Second, the exchange rate could take an unfavorable move effectively increasing your borrowing costs.
You must be logged in to see this link. Carry Trade
With margin leverage to increase the profits, the institutions SELL the USD treasuries and buy foreign sovereign bonds. Therefore, the USD currency is SOLD on the futures market and converted into a foreign currency to BUY the foreign bonds. The foreign bonds must be bought in their native foreign currency. |
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
|
Edited by - Country on 11/08/2009 16:00:16 |
|
|
|
Country
1000+ Penny Miser Member
USA
3121 Posts |
Posted - 11/09/2009 : 11:54:14
|
USD at a 15 month low today. They told us what they would do today!  |
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
|
|
|
|
jonflyfish
Penny Hoarding Member
USA
693 Posts |
Posted - 11/09/2009 : 14:03:11
|
Low rate currencies are the driver in carry trades. However there is never a free lunch. Currencies have increased volatility recently which makes adverse exchange rates a blink of an eye away. For the USD, it doesn't take much to wipe out what has been a relatively short period of carry trade benefit in this environment.
Also, with many split on the Fed raising or keeping rates in a ZIRP, any uptick in interest rates can wipe a USD carry clean and then some. Carry trades are usually longer term in nature. IMO the long term fundamental shift from the overwhelming reserve currency of choice is the bigger play on the USD. Massive treasury liquidation risk is another interesting risk. Keep an eye on treasury auctions going forward. |
The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring a temporary (and false) prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunities. |
|
|
| |
Topic |
|
IMF Says USD Funding ‘Carry Trade,’ USD Overvalued
Forum Locked
