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Carry Trade: Dollar v. Yen

Posted in Central Banks, Currencies by teslik on October 15, 2009

Moneybags_12An interesting question came up at a meeting I went to the other day: Why has the yen carry trade shifted so profoundly to a dollar carry, when it seems probable that the United States will have to raise interest rates before Japan will?  A few people mentioned liquidity, but clearly there is enough yen liquidity to support an active carry trade, given that the yen was, for years, the primary vehicle for carry trade borrowing.  Another argument, which one of my colleagues mentioned, is that markets are nervous about the new Japanese government launching an intervention to stabilize the yen.  That’s interesting.  I wonder how long it will take for the new government to reassure traders that this isn’t the case–and then if we will see a re-reversion back to the yen carry.

Mapping Exchange Rates

Posted in Currencies by teslik on August 7, 2009


I discovered a very cool site called Google Earth Library that compiles links to Google Earth maps with overlays of different demographic, political, or economic data. The image above is a screenshot of their U.S. dollar exchange rate map (the topographical “height” of each country represents its currency’s exchange rate against the U.S. dollar). I’m wondering if there’s some way you could map a time-progression of how the “heights” of different countries have evolved over time–that would be particularly useful in this context. Anyway, if you have Google Earth installed on your computer, you can open and explore the map here. I would also encourage checking out the site more generally, they’ve got lots of cool maps.