The most overvalued currency is the Icelandic krona: the exchange rate that would equalise the price of an Icelandic Big Mac with an American one is 158 kronur to the dollar; the actual rate is 68.4, making the krona 131% too dear. The most undervalued currency is the Chinese yuan, at 56% below its PPP rate; several other Asian currencies also appear to be 40-50% undervalued.
I read recently that warren buffet has a new bet on the foreign currency markets, of course he didn't reveal what currency this was, but many commentators believe it is the japanese yen, it is going to rise, the reason it has stayed low for so long is that the japanese central bank wants to make sure that the devastating deflationary recession of the nineties and early 2000s has been well and truly killed.
I read recently that warren buffet has a new bet on the foreign currency markets, of course he didn't reveal what currency this was, but many commentators believe it is the japanese yen, it is going to rise, the reason it has stayed low for so long is that the japanese central bank wants to make sure that the devastating deflationary recession of the nineties and early 2000s has been well and truly killed.
.... housewives are playing the Yen carry-trade with the New Zealand dollar,..... ... Bear Sterns. Rumours abound that they have asked creditors to give them time to unwind carry-trade positions.
All in substantiated rumour of course but I am watching with interest.
Would somebody mind explaining to me what carry trade means and how it works ? What were the housewives doing ?
Thanks for the info . I was aware of it as a sophisticated strategy if you dont mind the risk. I read a while ago that Polish people were doing this to get cheap mortgages but I had no idea housewives were doing it.
So... you're saying if I buy yen and hold, at some point in the next 12 months, it'll have gone up 40%?
What do you reckon are the chances of this NOT happening in the specified time frame? 1 in 10, 1 in 50?
So... you're saying if I buy yen and hold, at some point in the next 12 months, it'll have gone up 40%?
It happened before in 1998, following the Russian default and subsequent unwinding of the carry-trade by nervous hedge funds. That saw a 20% rise in the value of the Yen over two months. Given the increased size of the carry trade and participation by just about everyone from Eastern European property investors to Japanese housewives, there is scope is for even greater gain this time round.
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