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EURO CARRY TRADE BY WWW.THEFOREXNITTYGRITTY.COM

Euro Carry Trade

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http://www.TheForexNittyGritty.com - Euro Carry Trade - Will 1% loans from the European Central Bank to struggling European banks result in stabilization of the European banking system or a Euro carry trade?

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Page 1: Euro Carry Trade

EURO CARRY

TRADE

BY

WW

W. T

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Page 2: Euro Carry Trade

WILL 1% LOANS FROM THE EUROPEAN CENTRAL BANK TO STRUGGLING EUROPEAN BANKS RESULT IN STABILIZATION OF THE EUROPEAN BANKING SYSTEM OR A EURO CARRY TRADE?

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 3: Euro Carry Trade

THE EUROPEAN UNION HAS BEEN IN A SOVEREIGN DEBT DILEMMA FOR A COUPLE OF YEARS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 4: Euro Carry Trade

THE SOUTHERN TIER OF EU NATIONS, PLUS IRELAND, HAS BECOME THE PIIGS (PORTUGAL, IRELAND, ITALY, GREECE, AND SPAIN) GROUP.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 5: Euro Carry Trade

THESE NATIONS, MOST NOTABLY GREECE, WOULD HAVE BEEN UNABLE TO FINANCE THEIR NATIONAL DEBTS WITHOUT AID FROM LENDERS, THE IMF, THE EUROPEAN CENTRAL BANK AND OTHER EU NATIONS IN PARTICULAR.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 6: Euro Carry Trade

THE POSSIBILITY OF A BREAKUP OF THE EUROPEAN UNION OR AT LEAST THE DEPARTURE OF GREECE AND A COUPLE OF OTHER NATIONS LOOMED OVER THE CONTINENT FOR THE LAST FEW MONTHS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 7: Euro Carry Trade

JUST RECENTLY EU LEADERS MET IN PARIS AND AGREED TO AMEND THE EU TREATY TO ALLOW CLOSER FINANCIAL INTEGRATION.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 8: Euro Carry Trade

(READ THIS AS PUTTING A CAP ON POLITICALLY MOTIVATED PORK BARREL SPENDING TO BUY LOCAL VOTES.)

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 9: Euro Carry Trade

IN ADDITION EU MEMBERS GAVE THE EUROPEAN CENTRAL BANK GREATER AUTHORITY AND AUTONOMY IN DEALING WITH THE OVERALL DEBT SITUATION AS MANY BANKS WERE WEAK

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 10: Euro Carry Trade

AND MANY CONSIDERED A RUN ON FRENCH BANKS A DISTINCT POSSIBILITY AS MANY HAD INVESTED HEAVILY IN BONDS FROM GREECE, ITALY, AND THE OTHERS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 11: Euro Carry Trade

BUT, JUST WHAT DOES THIS HAVE TO DO WITH A EURO CARRY TRADE?

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 12: Euro Carry Trade

THE EXPRESSION, CARRY TRADE, IS USUALLY ASSOCIATED WITH THE YEN AND NOT THE EURO.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 13: Euro Carry Trade

JAPAN HAS HAD EXTREMELY LOW INTEREST RATES FOR TWO DECADES.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 14: Euro Carry Trade

INVESTORS HOLDING YEN CAN ENGAGE IN FOREIGN EXCHANGE TRADING AND OBTAIN US DOLLARS OR OTHER INTERNATIONAL CURRENCIES.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 15: Euro Carry Trade

THEN THE INVESTOR BUYS US TREASURIES IF HE NOW HAS DOLLARS OR, PERHAPS, ITALIAN OR GREEK NATIONAL DEBT BONDS IF HE HAS TURNED YEN INTO EUROS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 16: Euro Carry Trade

ANYONE WHO BOUGHT DOLLARS BEFORE THE RALLY LAST FALL AND THEN PURCHASED TREASURY BILLS BEFORE RATES FELL DID DOUBLY WELL.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 17: Euro Carry Trade

ON THE OTHER HAND MANY JAPANESE REPATRIATED OFFSHORE ASSETS TO PAY FOR THE DESTRUCTION OF THE WORST EARTHQUAKE AND TSUNAMI IN THEIR HISTORY.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 18: Euro Carry Trade

THIS YEN REPATRIATION SENT THE CURRENCY UP DANGEROUSLY FAST.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 19: Euro Carry Trade

THE RISE IN THE YEN WAS ONLY HALTED BY THREATS OF THE G7 MINISTERS TO INTERVENE IN STRENGTH.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 20: Euro Carry Trade

ANYONE WHO HELD OFFSHORE ASSETS IN A YEN CARRY TRADE DID POORLY AT THAT POINT.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 21: Euro Carry Trade

THE POINT OF THE YEN CARRY TRADE IS TO HAVE OR BORROW ASSETS IN A NATION WHERE INTEREST RATES ARE LOW, CONVERT TO ANOTHER CURRENCY, AND INVEST WHERE INTEREST RATES ARE HIGH.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 22: Euro Carry Trade

THE POINT IS ALSO THAT A CHANGE IN CURRENCY RATES DOES NOT ERASE ALL PROFITS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 23: Euro Carry Trade

THIS IS THE CONNECTION TO A SO CALLED EURO CARRY TRADE.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 24: Euro Carry Trade

A CONCERN OF SOME IS THAT STRUGGLING EUROPEAN BANKS THAT HAVE RECEIVED 1% INTEREST LOANS MAY BE TEMPTED TO INVEST IN HIGH RISK, POTENTIALLY HIGH RETURN, DEBT.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 25: Euro Carry Trade

WHETHER THIS WOULD BE EUROPEAN DEBT OR TO USE FOREIGN CURRENCY TRADING IN ORDER TO PRACTICE A EURO CARRY TRADE DEBT ELSEWHERE IN THE WORLD

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 26: Euro Carry Trade

THE POTENTIAL FOR PROFITS COULD BE GREAT, PROVIDING THAT THE GLOBAL ECONOMIC PICTURE BRIGHTENS.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 27: Euro Carry Trade

ON THE OTHER HAND THE LOANS COULD AMOUNT TO THROWING GOOD MONEY AFTER BAD IF ANYONE TRIES SUCH AN AGGRESSIVE AND RISKY STRATEGY.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 28: Euro Carry Trade

THE GOOD NEWS FOR THOSE FEARFUL OF SUCH A SCENARIO IS THAT OVERNIGHT DEPOSITS AT THE EUROPEAN CENTRAL BANK ARE AT AN ALL-TIME HIGH.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 29: Euro Carry Trade

APPARENTLY MANY OF THE EUROPEAN BANKS THAT NEEDED BAILOUTS HAVE LEARNED THEIR LESSON.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 30: Euro Carry Trade

THEY ARE AVOIDING ANY SEMBLANCE OF A EURO CARRY TRADE AND PUTTING THEIR SHORT TERM MONEY IN THE MOST SECURE LOCATION AVAILABLE, EVEN AT LOW INTEREST RATES.

W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

Page 31: Euro Carry Trade

FOR MORE INSIGHTS AND USEFUL INFORMATION REGARDING THE FOREX MARKETS AND FOREIGN CURRENCY TRADING, VISIT WWW.THEFOREXNITTYGRITTY.COM.