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Easy-Money Fed Fueling Dollar “Carry Trades”
A fascinating thing just occurred in the global interest rate market: For the first time since 1993, it became cheaper to borrow dollars than Japanese yen! The three-month dollar-based London Interbank Offered Rate, or LIBOR, slumped to 0.292 percent, compared with the yen-based LIBOR rate of 0.352 percent.
I know. You’re thinking: “Who the heck cares?” But this development is big — and so are the potential implications. It’s all because of something called the “carry trade,” which I’m going to get into right now …
The Carry Trade Explained …
Let’s say you’re an international investor looking to boost your returns. One…
21Sep2009 | Money and Markets | 1 comment | ContinuedGold Futures Dirty Secret (Part 2)
We ended the first part of this two part series with an unanswered question: Why has physical supply dried up now?
The answer to that question lies in the two vehicles that have made the gold carry trade possible. This is another issue that I’ve alluded to in prior issues of B&B, but I would again like to briefly explain this notion.
Gold Carry Trade
The gold carry trade takes two forms. The first is enacted by the central banks of the world. Essentially the banks use the futures market to pre-sell gold. This is a beautiful deal for the central banks when…
4Sep2008 | Oxbury Research | Comments Off | Continued
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