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Direxion Daily Financial Bull 3X ETF Message Board

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  • solochristos solochristos Oct 27, 2010 10:42 AM Flag

    Interesting Read on AUD/JPY and AUD/USD

    name, did you read the links discussing the yen carry trade? Here's one link I posted discussing the yen carry trade and its role in the 2008 fiasco.
    http://goldnews.bullionvault.com/yen_carry_trade_101620084
    Some excerpts from this 2008 article:
    "Japan sits at the epicenter of "bubble-mania" in foreign exchange, because its yield starved domestic investors plowed $6 trillion of their savings into overseas assets.
    ...Over the past several years, carry traders inflated several emerging stock markets to astronomical heights, and also boosted more mature stock markets in the developed economies. But the current unwinding of "Yen carry" trades is a very destructive force to global stock markets, much like the interbank credit freeze or the nuclear credit-default swap (CDS) time-bomb.
    ...making the "yen carry" trade one of the most feared weapons of mass destruction in global currency, commodity and stock markets today."

    These are not my words, they're the authors words.

    Here's a bloomberg guy William Pesek who foresaw in Feb 2006 the problem developing, and states the yen carry trade role in Long Term Capital Management blowup.
    http://www.bloomberg.com/apps/news?pid=newsarchive&refer=columnist_pesek&sid=a0gK4Vt__cBU

    Finally, this guy batinater in the message link referred above, is saying that the AUD/JPY and AUD/USD are the primary carry trades today. The carry trade is dependent on inflation in the aussie economy. If inflation slows down there or the interest rates in U.S. or Japan go up, the carry trades will unwind. They are in the trillions. Nobody knows.

    That's not to say after a correction the market will continue back up with government money printing, which I am not in favor of. Even Bernanke is out saying the initial money printing may be less than some have forecast.

    This was not a discussion of interest rate swaps or other hedging, just the carry trades, and the role is very real and important in the inflation of markets everywhere, as this poster attests..

    On Nov. 2 the RBA (Aussie central bank) is meeting about a rate decision.

 
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