You could be hearing more of this soon: the dollar carry trade.
Many investors, from hedge funds to Japanese housewives, had famously used the yen as a funding currency for their speculative activities during the previous stock market bubble. They borrowed yen at wafer-thin costs thanks to exceptionally loose monetary policy in Japan that took interest rates down to zero. They then swapped these for dollars and added generous doses of leverage to buy high-yield assets around the world, including India. That’s how these smart investors earned profits, or carry.
There is now another struggling economic power whose central bank has flooded the economic system with its currency and ensured that borrowing costs are near zero: the US. The dollar carry trade seems to be the new game in town.
It is notoriously difficult to estimate the size of this carry trade; nobody can say for sure how large the yen carry trade was at its peak. But regulators will need to keep a close eye on this new strain of an old virus.