Tuesday, Jul 17, 2007
An inflation report yesterday boosted expectations of another 25 basis-point increase on July 26. The juicy yield is drawing in speculators, whose leveraged bets have already pushed the kiwi to a 22-year high. Meanwhile, New Zealand exporters are complain
bloomberg.com: Carry Traders in Asia Look for Alternative
Carry traders in Asia, having survived the initial jitters from the U.S. subprime-mortgage crisis, are now looking for funding currencies with less risk.
While the Japanese yen and the Taiwanese dollar remain the vehicles of choice for financing purchases of the New Zealand dollar and other high-yielding currencies, the risk of a reversal in these trades is prompting the search for alternatives.
The cost of money in Taiwan is rising, partly because the central bank wants to kill the carry trade and arrest capital outflows. Although the yen remains very much in play, no one knows for how long. The Bank of Japan may signal higher interest rates as early as next month. And that makes funding positions in yen very profitable, but dangerous.
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