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Question: You Can Profit From The Answer, Too.
- Thread starter ByLoSellHi
- Start date
Okay forget the carry trade in the short JPY and long EUR sense. Now if Japanese banks are offering loans at 1% then what's to stop everyone and his mother from taking out 1% loans to pay for mortgages, car loans, etc. Hell, developing countries could take out loans at 1% to fund infrastructure projects. Why isn't this happening? I'm guessing Japanese banks won't give you a loan unless your a Japanese citizen? And I'm guess its illegal for a Japanese citizen to take the funds at 1% and loan them out at higher interest.
Please move this thread to the Economics forum, I think its more suitable there.
Please move this thread to the Economics forum, I think its more suitable there.
Quote from aeliodon:
Okay forget the carry trade in the short JPY and long EUR sense. Now if Japanese banks are offering loans at 1% then what's to stop everyone and his mother from taking out 1% loans to pay for mortgages, car loans, etc. Hell, developing countries could take out loans at 1% to fund infrastructure projects. Why isn't this happening? I'm guessing Japanese banks won't give you a loan unless your a Japanese citizen? And I'm guess its illegal for a Japanese citizen to take the funds at 1% and loan them out at higher interest.
Please move this thread to the Economics forum, I think its more suitable there.
Maybe because the exchange rate risk is, well, damn risky?
If you had opened a carry trade with gbp vs yen at yesterday's close, you would need to hold the position for nearly (edit) 7 months for the interest carry to make up for the exchange rate loss for today's single session, assuming exchange rates remain the same (I just eyeballed the math, if I am way off hopefully someone can correct me - I think that's about right).
I don't trade Forex so I have limited experience with this stuff but lets say:
GBP offers 5.25% interest
YEN offers .25% interest
Thats a 5% interest rate differential. So if a Japanese citizen were to borrow YEN from his local bank and invest it in a CD at a UK bank - then the YEN would have to appreciate 5% for him to lose money on this trade, is this right?
GBP offers 5.25% interest
YEN offers .25% interest
Thats a 5% interest rate differential. So if a Japanese citizen were to borrow YEN from his local bank and invest it in a CD at a UK bank - then the YEN would have to appreciate 5% for him to lose money on this trade, is this right?
Quote from aeliodon:
I don't trade Forex so I have limited experience with this stuff but lets say:
GBP offers 5.25% interest
YEN offers .25% interest
Thats a 5% interest rate differential. So if a Japanese citizen were to borrow YEN from his local bank and invest it in a CD at a UK bank - then the YEN would have to appreciate 5% for him to lose money on this trade, is this right?
That is my interpretation, roughly.
What is going on here? Is this really happening to elite trader? This thread has to be a joke.
We should be discussing what type of options hedge would compliment a carry trade or the advantages of using CHF instead of JPY as a funding currency. Maybe it is time put on the old Goldman Sachs trade of short kiwi and long Brazilian Real?
We should be discussing what type of options hedge would compliment a carry trade or the advantages of using CHF instead of JPY as a funding currency. Maybe it is time put on the old Goldman Sachs trade of short kiwi and long Brazilian Real?
Quote from zf trader:
What is going on here? Is this really happening to elite trader? This thread has to be a joke.
We should be discussing what type of options hedge would compliment a carry trade or the advantages of using CHF instead of JPY as a funding currency. Maybe it is time put on the old Goldman Sachs trade of short kiwi and long Brazilian Real?
It's not a joke.
I'm not at all familiar with the intricacies of currency swaps and the carry trade, obviously.