Carry Trade & Economist Summary

The Economist has a good sample of what happened during the last weeks. As an example i have taken the report on the carry trade. I hope the links work without subscription. O top off this you can click at the labels to get more on last weeks topics. Please leave a comment if a certain Link doesn´t work.

Der Economist hat eine ziemlich gute Übersicht was in den letzten Wochen abgegangen ist. Beispielhaft habe ich mir mal den Report zum Carry Trade herausgepickt. Ich hoffe das die Links auch ohne Abo funktionieren. Hinterlaßt bitte einen Kommentar wenn ein bestimmter Link nicht abzurufen ist.
Banks in trouble
A liquidity squeeze "Bankers' mistrust"
Funding difficulties "A conduit to nowhere"
Hedge funds "Behind the veil"
Financial contagion "Mortgage flu"
Should central banks act as buyers of last resort?

Not-yet-desperate housewives
Is Mrs Watanabe doing her bit for global stability?

IN MOST of the world in the past week, attention has been on highly leveraged hedge funds that have been forced to dump assets bought on margin. In Japan, however, a different species of margin trader has—until now, at least—stood firm: the housewife. On her shoulders may lie responsibility for some of the stability of the global financial system.

On August 15th the Japanese currency climbed to a 4½-month high against the dollar and continued to surge against the New Zealand dollar, raising concerns about the sustainability of the carry trade, through which investors borrow in cheap yen to buy higher-yielding assets elsewhere. This had made fortunes for international investors but, lately, Japanese retail investors had become the carry trade's greatest enthusiasts.

> The latest strenght of the Greenback is worth mentioning and if the $ will sustain these trend it will be unusual. I doubt that that this will last. Brad Setzer is also wondering The dollar, still a currency that you run to?

> Die Stärke des US $ in den letzten Wochen des Chaos ist zumindest wenn dieser Trend anhält recht ungewöhlich. Ich glaube das dies nicht von Dauer sein wird. Brad Setzer stellt sich die gleiche Frage The dollar, still a currency that you run to?

The metaphorical Mr and Mrs Watanabe account for around 30% of the foreign-exchange market in Tokyo by value and volume of transactions, according to currency traders, double the share of a year ago. Meanwhile, the size of the retail market has more than doubled to about $15 billion a day.

One reason for the surge is margin trading. Brokers are offering leverage of as much as 200 times the down-payment (though the average is more like 20 to 40 times).

In July Japanese retail investors' short positions on the yen (a bet that it would fall) exceeded the amount taken by traders on the Chicago Mercantile Exchange, a foreign-exchange trading hub. “The gnomes of Zurich were accused in their day of destabilising markets. The housewives of Tokyo are apparently acting to stabilise them,” boasted Kiyohiko Nishimura, a Bank of Japan board member, in July.

Strikingly, as the yen appreciated, retail traders, rather than dump their positions, saw a buying opportunity and sold yen for other currencies, softening its rise. “The Japanese government has not intervened—they've not had to, because the Watanabe-sans have been selling yen for them,” says James Gow of FXOnline Japan, a retail broker.