Carry trade unwinds

Carry trade unwinds
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First Published: Tue, Mar 04 2008. 12 19 AM IST
Updated: Tue, Mar 04 2008. 12 19 AM IST
The tumble in Asian stocks on Monday will likely take attention away from another slide—in the value of the dollar. The US greenback’s value is sailing towards 100 yen and 1 Swiss franc.
Why should investors in India bother about how the dollar moves against these two currencies? Because of rock-bottom interest rates in Japan and Switzerland, the yen and the Swiss franc have been among the popular funding currencies for the carry trade, in which punters borrowed in low-interest currencies and shovelled the money into high-yield assets such as Indian equities.
The continued fall of the dollar against the yen and the Swiss franc is one more sign that the carry trade is unwinding. This could be bad news for Asian markets in the near future. Less cash from the carry trade will come their way.
The dollar has also been steadily slipping against another asset. Gold is inching towards the $1,000 mark. Watch these prices.
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First Published: Tue, Mar 04 2008. 12 19 AM IST
More Topics: Dollar | Yen | Swiss franc | Investor | Views |