rosey99

Wednesday FX View: ISM Contraction Creates Dollar Chaos

I think you mean 89.58 for USD/JPY.

Interesting. With all of the USD-funded carry trades out there, and given recent history, traders are right to be a bit jumpy. Hedges are pretty pricey right now and I wonder how much wiggle room these folks really have. Of course, sleeping with one eye open, and a finger on the trigger, is not terribly restful. I suppose we'll see how long they last in the fullness of time.

The Best Funding Currency

Carry trades are a wonderful example of a feedback loop. As more participants jump on the trade, the cost of hedging tends to increase (volatility increases), as does the currency risk (we get farther from PPP). The inevitable unwind can be quite dramatic, though this looks like it might go on for a while.

I think you might be on to something here. Thanks for an interesting post.

The United Nations Turn Bearish on the Dollar

I don't know what to make of this. There is a lot of talk these days about doing away with the USD as a global reserve currency, and then we see a proposal like using SDRs instead, which for me reveals just how impractical the alternatives really are.

The USD did not become the reserve currency of choice (emphasis on the word "choice") overnight or by decree, and I have real doubts that the next reserve asset of preference will either. The talk is interesting, it indicates real fear, and a real desire for an alternative, but at the same time it suggests a certain level of frustration, especially when SDRs are mentioned.