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To: nihil who wrote (63579)8/30/1998 1:07:00 AM
From: Aaron Cooperband  Read Replies (1) of 186894
 
Nihil -

Re: "Really cautious people cover by selling dollars forward for yen at the maturity of the T bills (or buy yen forward for dollars -- same thing). This coverage reduces the return but eliminates exchange rate risk."

While I agree with almost all of your posting, Japanese people don't use this strategy when purchasing T-bills. It is used frequently, however, for other higher yielding investments.

After selling dollars forward (at the forward rate, of course) the T-bills will yield a Yen rate of return less than the purchaser's liabilities.

Aaron
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