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WTF the dollar is now the Carry Trade currency

 
Enlilson
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03/27/2008 11:10 PM
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WTF the dollar is now the Carry Trade currency
What does Iceland's decision to raise its key interest rate to 15% yesterday have to do with the strength of the greenback? Plenty, according to currency experts. As other countries strengthen their currencies, the Federal Reserve has been loosening its monetary policy, creating a yawning gap between the yields on the dollar versus other currencies. Investors are taking advantage of this differential, selling dollars and buying higher-yielding currencies, a strategy known as a "carry trade."
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In a carry trade, a trader borrows dollars from a bank, converts the funds into Icelandic krona, for example, and buys an Icelandic bond for the equivalent amount. If the bond is paying 15%, and the American interest rate is just 2.25%, the trader can make a profit off this differential, a whopping 12.75 percentage points.

Traditionally, the Japanese yen has been the currency of choice for a carry trade because the interest rate is close to zero. But as the Japanese currency has been strengthening, and the Federal Reserve continues to slash rates, investors are now looking at the dollar as a replacement currency. "It is pretty pathetic that the world's reserve currency is now being used as the carry trade currency," an investment strategist at Miller Tabac + Co., Peter Boockvar, said.

[link to www2.nysun.com]
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Enlilson (OP)

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03/27/2008 11:14 PM
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Re: WTF the dollar is now the Carry Trade currency
This is not a good thing folks.....
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Anonymous Coward
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03/28/2008 07:35 AM
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Re: WTF the dollar is now the Carry Trade currency
dollar is a dirty smelly paper
Enlilson (OP)

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03/28/2008 08:53 AM
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Re: WTF the dollar is now the Carry Trade currency
"The dollar is now lower than the Swiss frank and many other currencies, therefore there is a big fundamental shift causing investors to borrow dollars and invest in higher-yielding assets abroad," a trader and author of a book on foreign exchange trading, Abe Cofnas, said.
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Enlilson (OP)

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03/28/2008 08:55 AM
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Re: WTF the dollar is now the Carry Trade currency
· US Dollar loses ground on Federal Reserve growth downgrades, Bernanke testimony

· Australian dollar and rest of carry trade take a hit - where to next?

Link to Podcast

[link to media.dailyfx.com]
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BelieveYouMe

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03/28/2008 10:06 AM
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Re: WTF the dollar is now the Carry Trade currency
Ah-yes
Thee motive and modus operandi.
Agents manipulating machinery.

good work
MFWIC

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03/28/2008 06:25 PM
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Re: WTF the dollar is now the Carry Trade currency
They're at it again. If you haven't seen this Vid, you should watch it now.

[googlevid] [link to video.google.com]
Anonymous Coward
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03/28/2008 07:04 PM
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Re: WTF the dollar is now the Carry Trade currency
bsflag
Enlilson (OP)

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03/30/2008 12:22 AM
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Re: WTF the dollar is now the Carry Trade currency
bsflag
 Quoting: Anonymous Coward 274690

This flag is for what?
It doesn't matter who I m it's who U R so ChoOse