Search Results

You are looking at 1 - 10 of 52 items for :

  • "carry trade activity" x
Clear All
International Monetary Fund. Asia and Pacific Dept

also encourages carry trade activities (i.e., the taking of net short positions in yen), which increases the likelihood of a large appreciation in the yen as the risk of a carry trade reversal increases. Heightened uncertainty typically leads to an appreciation of the yen due to safe haven effects, which can be amplified by a reversal in carry trade activities. 2 Because interest rates in Japan are unable to adjust due to the effective zero lower bound (ZLB), yen appreciation is likely to be more pronounced than that of other safe haven currencies. Carry trade

Mr. Fei Han and Mr. Niklas J Westelius
The yen is an important barometer for the Japanese economy. Depreciations are typically associated with favorable economic developments such as increased corporate profits, rising equity prices, and upward pressure on domestic consumer prices. On the other hand, large and sharp appreciations run the risk of lowering actual and expected inflation, squeezing corporate profits, generating a negative wealth effect through depressed equity prices, and reducing confidence in the Bank of Japan’s efforts to reflate the domestic economy and achieve the inflation target. This paper takes a closer look at underlying drivers of rapid yen appreciations, highlighting the key role of carry-trade and the zero lower bound as important amplifiers.
Mr. Thomas Dowling and Nicoletta Batini
Using an adaptation of the Uncovered Interest Parity (UIP) condition, this paper analyzes the drivers behind the large, symmetric exchange rate swings observed during the financial crisis of 2008-2010. Employing a Nelson-Siegel model, we estimate yield curves and decompose the exchange rate movements into changes we attribute to monetary policy and a residual. We find that the depreciation phase of the currencies in our sample was largely dominated by safe-haven effects rather than carry trade activity or other return considerations. For some countries, however, the appreciation that began at the end of 2008 seems largely to reflect downward movement in the cumulative revisions to nominal forward differentials, suggesting carry trade.
Mr. Thomas Dowling and Nicoletta Batini

to a series of bankruptcies and the subsequent cascade of well-known events. We find that the depreciation phase of the currencies in our sample during the 2008–2010 financial and economic crisis was largely dominated by safe-haven effects rather than carry trade activity or other return considerations. For some countries, however—notably the Euro Area, Brazil, Mexico, and Chile—the appreciation that began at the end of 2008 seems largely to reflect downward movement in the cumulative revisions to nominal forward differentials, suggesting carry trade. This

Mr. Jacob Gyntelberg, Mr. Subhanij Tientip, and Mr. Mico Loretan

Front Matter Page Institute for Capacity Development Contents I. Introduction II. The Markets and the Data A. Sample Period and Foreign Investor Definition B. The Onshore FX Market C. The Equity Market D. The Bond Market III. Private Information and FX Markets IV. Empirical Results A. FX Order Flow Induced by Stock and Bond Market Transactions B. Order Flow Regression C. Longer-Run Impact of Portions of FX Order Flow on the Exchange Rate D. Possible Alternative Explanations 1. Hedging Activity 2. Carry Trade

Mr. Fei Han and Mr. Niklas J Westelius

, three main conclusions are put forth. A rise in foreign interest rates tends to depreciate the yen . However, it also encourages carry trade activities (i.e., the taking of net short positions in yen), which increases the likelihood of a large appreciation in the yen as the risk of a carry trade reversal increases. Heightened uncertainty typically leads to an appreciation of the yen due to safe haven effects, which can be amplified by a reversal in carry trade activities . 2 Because interest rates in Japan are unable to adjust due to the effective zero lower

John Hooley

In 2013, the liquidity position of the commercial banking system vis-à-vis the Central Bank of West African States (BCEAO) swung from a structural liquidity surplus to a deficit. This reflected a sharp increase in commercial banks’ borrowing from the BCEAO, which was used to fund purchases of government securities. The underlying causes likely included a combination of widening fiscal and external imbalances, and carry-trade activity by some banks. These developments, in turn, pose risks to fiscal and financial stability, financial development, and monetary