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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Peter V who wrote (160862)	10/28/2008 6:11:52 PM
From: patron_anejo_por_favor	Respond to of 306849

The most common carry trade over the past 5 years has been short the Yen and long the Euro (or alternatively, another higher yielding currency of choice: the AUD, the loonie, the pound). This is made possible because the Yen "costs" almost nothing to short due to negligible short term rates. The hedgies loved this trade and loved to do it with leverage. Easy money while it worked. However, as they've been scrambling to deleverage, the trade has been reversed, i.e, the Yen has been bought and every other currency sold. To a lesser extent, the Clownbuck has benefitted from the same trade, particularly at times when short term rates were low (like the past year, for example). So the hedgies are short covering dollars in soize. In the case of the dollar, a lot of the proceeds of shorting it were used to buy commodities (particularly gold and oil) and EM stocks. This is part of the reason these groups have been beaten like a red headed stepchild for the last 3 months as the 'deleverage trade' has been pursued (by the Margin Man, in some cases).