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Emerging Market Carry Trade Weakens USD

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http://www.theforexnittygritty.com/forex/emerging-market-carry-trade-weakens-usd …

http://www.theforexnittygritty.com/forex/emerging-market-carry-trade-weakens-usd

Emerging Market Carry Trade Weakens USD

Currency speculators are starting to bet against the USD in the coming months. An emerging market carry trade weakens the USD but other factors are at fault. First of all, for many, the USD is no longer a safe haven currency. Although the political game playing that brought the USA to the brink of default on its debts is temporarily quiet many are concerned that this is just the lull before the next storm. To the extent that political gamesmanship drives the USD fundamental analysis of Forex pairs is difficult to impossible when half of the trade is the USD. As money moves to other currencies it drives the value of the USD down. And, many emerging markets are raising interest rates in order to attract capital. Traders move capital out of low interest rate markets into high interest rate ones. This amounts to a carry trade and an emerging market carry trade weakens the USD. US interest rates will stay down until the economy starts to mend more thoroughly


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  • 1. EMERGING MARKET CARRY TRADE WEAKENS USD By www.TheForex NittyGritty.com
  • 2. CURRENCY SPECULATORS ARE STARTING TO BET AGAINST THE USD IN THE COMING MONTHS. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 3. AN EMERGING MARKET CARRY TRADE WEAKENS THE USD BUT OTHER FACTORS ARE AT FAULT. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 4. FIRST OF ALL, FOR MANY, THE USD IS NO LONGER A SAFE HAVEN CURRENCY. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 5. ALTHOUGH THE POLITICAL GAME PLAYING THAT BROUGHT THE USA TO THE BRINK OF DEFAULT ON ITS DEBTS IS TEMPORARILY QUIET MANY ARE CONCERNED THAT THIS IS JUST THE LULL BEFORE THE NEXT STORM. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 6. TO THE EXTENT THAT POLITICAL GAMESMANSHIP DRIVES THE USD FUNDAMENTAL ANALYSIS OF FOREX PAIRS IS DIFFICULT TO IMPOSSIBLE WHEN HALF OF THE TRADE IS THE USD. AS MONEY MOVES TO OTHER CURRENCIES IT DRIVES THE VALUE OF THE USD DOWN. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 7. AND, MANY EMERGING MARKETS ARE RAISING INTEREST RATES IN ORDER TO ATTRACT CAPITAL. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 8. TRADERS MOVE CAPITAL OUT OF LOW INTEREST RATE MARKETS INTO HIGH INTEREST RATE ONES. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 9. THIS AMOUNTS TO A CARRY TRADE AND AN EMERGING MARKET CARRY TRADE WEAKENS THE USD. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 10. US INTEREST RATES WILL STAY DOWN UNTIL THE ECONOMY STARTS TO MEND MORE THOROUGHLY AND THE FED CUTS BACKS ON ITS QUANTITATIVE EASING PROGRAM WHICH IN TURN HOLDS INTEREST RATES DOWN. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 11. THE LONG TERM http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 12. EVERY TRADER HAS ONE EYE ON THE US FED TO SEE WHEN THEY REDUCE THE $85 BILLION A MONTH STIMULUS PROGRAM AS DOING SO WILL DRIVE UP US TREASURY INTEREST RATES AND THE VALUE OF THE US DOLLAR. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 13. HOWEVER, THE RECURRING ISSUE OF POSSIBLE SOVEREIGN DEBT DEFAULT IS A SERIOUS ONE FOR THE USA. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 14. IT COULD END UP LIKE THE STORY OF THE BOY WHO CRIES WOLF TOO MANY TIMES. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 15. EVENTUALLY PEOPLE WILL START IGNORING THE USA AND BANKING THEIR RESERVES IN OTHER CURRENCIES. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 16. WHEN NO ONE SHOWS UP TO PURCHASE US DEBT THE RATES WILL GO UP UNLESS THE COUNTRY LEARNS TO LIVE WITHIN ITS MEANS. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 17. THE LONG TERM ISSUE IS STILL THE HUGE US DEBT BURDEN. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 18. ALTHOUGH CURRENCY TRADERS TODAY ARE FOCUSING ON HIGHER INTEREST RATES IN OFFSHORE ECONOMIES THE LONGER TERM FOCUS MAY BE AWAY FROM THE USD. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 19. WHILE AN EMERGING MARKET CARRY TRADE WEAKENS THE USD TODAY NOT DEALING WITH THE DEBT BURDEN AND SHORT SIGHTED POLITICS IS LIKELY TO DAMAGE THE USD MORE SEVERELY IN THE LONG TERM. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 20. IF THAT IS THE CASE THOSE USD ASSETS THAT ARE CONVERTED TO REALES, COLONES, VARIOU S PESOS, RUBLES, YUAN, RA ND, AND RUPEES MAY NEVER COME BACK. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 21. TRADING TODAY AS AN EMERGING MARKET CARRY TRADE WEAKENS THE USD http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 22. THE COUNTRIES WHERE THIS TACTIC WILL WORK WILL BE THOSE WHOSE CURRENCIES SUFFERED MOST IN MIDSUMMER SELLOFFS. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 23. THESE INCLUDE THE INDIAN RUPEE, THE INDONESIAN RUPIAH, THE SOUTH AFRICAN RAND, THE BRAZILIAN REAL, AND THE TURKISH LIRA. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 24. AS ALWAYS TIMING IS IMPORTANT AND FACTORS CAN CHANGE. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 25. KEEP AN EYE ON CHINA AS THEIR DEBT STRUCTURE IS STILL SUSPECT AND THEIR EXPORTS ARE FALLING AS EUROPE AND NORTH AMERICA ARE NOT COMING BACK ON LINE AS THE PATRONS OF CHEAP PRODUCTS FROM CHINA THAT THEY ONCE WERE. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 26. AND WHEN THE FED ACTS TO EASE QUANTITATIVE EASING AND INCREASED BOND YIELD DRIVE THE DOLLAR HIGHER THE SHORT TERM SITUATION WILL CHANGE. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd
  • 27. AS ALWAYS DO YOUR OWN HOMEWORK AND DO NOT BE AFRAID TO SIT OUT A TRADE THAT YOU DO NOT UNDERSTAND. http://www.the forexnittygritty. com/forex/em erging-marketcarr y -tradeweakens-usd