Dig Deep & You Shall Find It.....
Dollar Carry Trade Is Once In A Lifetime Opportunity...
Pourquoi...???
Carry Trade In Other Currencies Had To Be Converted To Dollars For Deploying In Other Countries.
Therefore, Dollar Carry Trade Is Much More Covenient...Taking Away A Few Inherent Risks Present In Other Currencies Such As JPY & CHF.
To Illustrate Simplified Version Of (Step By Step YEN Carry Trade)
a) American Hedge Fund Borrows In Yen
b) Converts To USD
c) Deploys It To HongKong
d) Where USD Gets Converted Again To Hongkong Dollar For Investment
e) Book Profit On Investment Which Is In Hongkong $
f) Convert It USD, Send The Profits Back To U.S.
g) Convert USD Back To Yen & Pay The Principal Back With Interest In Yen.
If You Think Above Is Complicated....
Here Is What The Hedge Funds Have To Constantly Monitor During The Investment Cycle Of YEN Carry Trade
a) Monitor The Actual Investment
b) 3 Different Currency Exchange Risk
c) Point [b)] Also Requires Keeping Tabs On An Extra Country & It's Economy & What That Country's Central Bankers Are Going To Be Doing At Every Policy Meetings....
If Anybody Thinks Above Is Complicated...In Reality It Is Perhaps 100 Times More Complicated....That Is The Origin Of Hedge Funds.
SavantGarde
Dollar Carry Trade Is Once In A Lifetime Opportunity...
Pourquoi...???
Carry Trade In Other Currencies Had To Be Converted To Dollars For Deploying In Other Countries.
Therefore, Dollar Carry Trade Is Much More Covenient...Taking Away A Few Inherent Risks Present In Other Currencies Such As JPY & CHF.
To Illustrate Simplified Version Of (Step By Step YEN Carry Trade)
a) American Hedge Fund Borrows In Yen
b) Converts To USD
c) Deploys It To HongKong
d) Where USD Gets Converted Again To Hongkong Dollar For Investment
e) Book Profit On Investment Which Is In Hongkong $
f) Convert It USD, Send The Profits Back To U.S.
g) Convert USD Back To Yen & Pay The Principal Back With Interest In Yen.
If You Think Above Is Complicated....
Here Is What The Hedge Funds Have To Constantly Monitor During The Investment Cycle Of YEN Carry Trade
a) Monitor The Actual Investment
b) 3 Different Currency Exchange Risk
c) Point [b)] Also Requires Keeping Tabs On An Extra Country & It's Economy & What That Country's Central Bankers Are Going To Be Doing At Every Policy Meetings....
If Anybody Thinks Above Is Complicated...In Reality It Is Perhaps 100 Times More Complicated....That Is The Origin Of Hedge Funds.
SavantGarde
SG
Very true. But as we have seen in past, smart money doesnot do what starts looking obvious to everyone. There was Yen carry trade sometime back. Even though interest rates in Japan are still same negligible, there is hardly any Yen carry trade now. Same thing will happen to Dollar carry trade sometime irrespective whether Feds tinker with interest rates or not. These days with everyone looking at Dollar index 24/7, I am sure smart money is already working overtime trying to find some other innovative reason to trade so that others remain confused where the market is heading to.
Cheers !!
Very true. But as we have seen in past, smart money doesnot do what starts looking obvious to everyone. There was Yen carry trade sometime back. Even though interest rates in Japan are still same negligible, there is hardly any Yen carry trade now. Same thing will happen to Dollar carry trade sometime irrespective whether Feds tinker with interest rates or not. These days with everyone looking at Dollar index 24/7, I am sure smart money is already working overtime trying to find some other innovative reason to trade so that others remain confused where the market is heading to.
Cheers !!