The Wall Street Journal discussed the role of the carry trade in Thursday’s issue, quoted below, and Friday’s Financial Times, pointing to overnight trading in Tokyo, says the situation is worsening. The Economist and other financial publications have commented on the magnitude and risks of the carry trade, and how disruptive it could be if […]
Read more...An informative article in the current Economist on the dangers and economic distortion created by the carry trade, a topic we’ve discussed. On a massive scale, investors, typically hedge funds, are borrowing in yen, a currency with very low borrowing costs, and investing in currencies where the interest rates are high, like the New Zealand […]
Read more...A post from Mark Thoma’s Economist’s View, “Will the Euro Replace the Dollar?,” is useful and informative, but I am surprised that Thoma didn’t mention developemnts that confirm the authors’ thesis, namely, that the euro is becoming a competitor for the dollar as a reserve currency: Some countries that have been key providers of capital […]
Read more...While this topic may seem a bit esoteric to some readers, it is just about the most simple-minded trade in the financial markets, which is precisely why so many players are involved in it. You borrow in a currency that has low prevailing interest rates, like the yen, and invest in instruments in a currency […]
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