In last month or so, dollar up about 15% against euro, but down about 15% against yen? I can understand the yen part, as Japanese investment in U.S. securiries are exiting. But what’s with the euro?
carry-trade selloff look at price decline in aud/jpy and nzd/jpy in last three days … they were among top carry pairs
so those who borrowed yen in the past and invested in aud, nz, usd, and others are now selling their (aud, nz, usd) and buying the yen. correct? But what ar ethey doing with their yens? If they sell it, the yen should be dropping, but it isn’t. So, are they just holding on to their yens?
They borrowed Yen in first place. So they are just reversing that trade. Who knows? Carry reversal looks already little overdone by now and we could see a good bounce back in carry even with slight easing in credit markets. AUD/JPY was at 84 less than a week back, not at 63.
Because the EUR is a currency that has higher yield then the USD. Investors are now moving away from risk, buying USD and treasuries. It’s because of the difference in iterest rates btw US and Europe. Sell high yiled and buy low yield.
It is still not clear to me why the dollar is rising. If you look at the dollar index you will see that it’s been steadily rising, already up over 10% in the last three weeks. If confidence in the U.S. is really down, why would people be buying U.S. dollars? I would assume they would do that only if they expect interst rates in the U.S. to surge, which could happen of course (if things really go the wrong way), but we are seeing the FED cut rates, already 50 basis points last week. Also, if investors are taking their money out of the U.S. securities market, both stocks and bonds, you would think they would be selling their dollars for something else, like other currencies or gold, but again that’s not what’s been happening in the last three weeks at least. Any thoughts?
i think the JPY isn’t getting like super strong because the BoJ keeps injecting tons of JPY into the system. I think they gave S. Korea lot to support their Won / equity market. Sure the BoJ won’t reduce rates, but I reckon they’ll put a lotta yens out there. When risk appetite comes back, carry trade (borrow in JPY and pay 0.5% per year and invest in AUD and get 6% per year) will be back in vogue
My 5c worth: JPY is strengthening due to the reversal of the carry trade USD is strengthening due to a flight to safety (ie US Treasuries and bonds). As US investors sell overseas investments they are bringing the money back to the US and investing in US Govt securities.
newsuper Wrote: ------------------------------------------------------- As US investors sell > overseas investments they are bringing the money > back to the US and investing in US Govt > securities. + 1
As mentioned before in this thread, the yen is rising because of people unwinding the carry trades. That is, they are buying to cover the sell before. They’re not buying the yen and then holding on to it. They are buying it to cover the sell from before. The dollar is rising not because of overseas investments buying the US govt securities. Overseas people have enough trouble as it is just paying off their debt. Overseas people are buying the dollar to pay off their troubled us assets. The dollar is rising because nobody is lending money. All the banks are hoarding cash to pay off debt or debt that will be needed to get paid off very soon. Investors without debt are selling stocks to move into treasurys. That’s why the stocks are falling and rates on treasury’s are falling.