LOL, I'm not a USD expert, I don't know exactly how the
carry trade is set up, but both $ vs Euro and Yen vs $ were
overshorted by speculators, which has been contributing to
USD rally and Yen rally. I think a cut is now anticipated
for US by December, and a raise for Yen, which is also
helping the Yen, and now started dropping the dollar
(before it was rallying on Fed comments that they were not
going to cut, but debt issues changed the market outlook).
When foreign economies are stronger than US,
that will inevitably result in higher rates, which, in turn,
will drop the dollar if US economy turns weaker.
In other words, I would expect a dollar drop if the US economy
weakens more than the rest of the World. Trade deficit
will accelerate the drop. A blow-up of carry trade is another
issue that could happen when yen strengthens. I would expect
lots of volativity due to one side of the trade blowing up. -g-
Lots of variables besides the carry trade -g- |
