Bo Peng

When Will the USD Carry Trade Unwind?

Thanks for your insight, user355414.

I agree that both devaluing of USD externally and inflation internally are certainty in our future. Even if it's not the gov/fed's explicit policy, it's at least implicit policy in the sense that they would try to stay out of the way if it goes that direction. Devaluing USD is the cheapest way to reduce external debt, as is inflation for internal debt. It's a scam as far as debtors are concerned. But banks, bond holders, and Asia are hard-pressed to find much sympathy nowadays. "We need to get through this so screw'em."

There's another possible factor for the recent strength in USD: US foreign investment have been pulling back.

But I just don't understand the "perceived safety" argument. How can anyone perceive any safety advantage in USD assets today?

We're living in a surreal world. Everybody seems to agree USD will be devalued yet USD keeps going up. Everybody seems to agree inflation will pick up and treasury will collapse under its own weight yet treasury has been holding up very well. Are these bubbles? I think so, especially if the "stealth bidder" for treasuries is the Fed.

When Will the USD Carry Trade Unwind?

MarvinMBA, yours is the "safety" or "risk aversion" argument. But it most certainly cannot explain the recent behavior. How do you explain yesterday, when the stock market tanked ~5%, everybody hated the non-plan Plan, no significant bad economic news from the rest of the world, yet USD rallied? Look up some historical graphs.