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CarryTrade Carrytrade generally refers to foreign exchange forexbonusrebate trade, that is, to borrow the currency with lower cashback forexterest rates, forex discount brokers then buy and hold a higher yield currency, thereby earning carry trade (CarryTrade): the global liquidity flood maker February 27, 2007, Chinas A-share forexdiscountbrokers plunge heart palpitations on the day the Shanghai Stock Exchange Comprehensive index plunged 8.84%, the Shenzhen component index plunged 9.29%, the largest single-day decline in a decade; when the A-share plunge is a foregone conclusion, the international currency market ripples, the U.S. dollar against the forexrebatesbrokers exchange rate from 120.38 began to fall rapidly, to 4:00 a.m. on February 28, the lowest fell to 117.49, a decline of 2.4% in 15 hours, the rapid decline in recent years At the same time, as European and North American stock exchanges opened one after another, global stock markets fell. From that time on, people began to pay attention to the long-standing carry trade and the close relationship between carry trade and global stock markets Cheap yen flooded the global market From April, the carry trade made a comeback, and the euro, Australian dollar and British pound quickly returned to their original levels against the yen, while in the recent past, the Bank of Japans interest rate hike was not a good idea. After the Bank of Japans uncertainty about future interest rate hikes, the carry trade intensified, with high-interest currencies hitting record highs against the U.S. dollar, with the dollar holding at a four-and-a-half-year high near ¥123.70 against the yen, the euro hitting a record high of ¥166 against the yen, the Australian dollar at a record high of ¥104.50 against the yen, and the British pound hovering near a high of ¥245.20 against the yen. Trading (CarryTrade) is the use of different currency spreads to make gains in the trading method due to the long-term implementation of zero interest rates in Japan, in order to chase the spread gains, international investors have borrowed yen to buy those denominated in other currencies high-yielding assets, hoping to profit from it. According to the Bank for World Settlements annual report on foreign exchange markets, the main factor behind the abundance of global liquidity funds from 2005 to 2006 was the arbitrage behavior caused by the spreads between currencies. The prerequisite for carry trade to bring in revenue is that currency market fluctuations must be smooth, because carry traders have to bear the risk of exchange rate fluctuations, if the exchange rate fluctuates significantly, not only the exchange rate loss may erode the carry trade gains, but also may make carry traders lose their money. In the past year, as more and more investors borrowed the yen and then dumped it to buy assets denominated in other currencies In addition, the carry trade funds are largely flowing into the stock market, which has a high liquidity capacity, so we can see that the global stock market is rising in a situation of sufficient liquidity, and it cannot be denied that the carry trade has a weakness. However, when the market realizes the risk factors that may threaten the carry trade, carry traders will close their positions without hesitation.  As Japanese companies have to repatriate their overseas profits in exchange for yen before the end of the fiscal year at the end of March, Japanese companies have to withdraw their international investments and close out their positions on carry trades, causing a sharp appreciation of the yen, while other investors close out their positions in order to lock in their profits, causing greater volatility in the yen. The second is the volatility of the asset prices held by carry traders Global stock markets have reached record highs this year, and one of the major reasons is the excess liquidity driven by the carry trade for the yen, which is precisely one of the sources of global liquidity flooded after a sharp rise, once the stock market turned down, resulting in the evaporation of funds. It will pose a threat to the yen carry traders stock market turmoil may trigger a chain reaction in the currency market, also posing a threat to carry traders ultimately global stock market turmoil and the yen surge to produce a causal positive feedback impact: the stock market fell, triggering the yen carry trade was closed, short covering buying to push the yen up; the yen rose, further prompting the carry trade was closed, thereby reducing the supply of funds to the stock market, resulting in the stock market continued Setback low material will be a long-term international financial markets recently there have been concerns about the U.S. economic situation and the global stock market overheating, carry traders are always ready to sell their holdings of other types of assets, and then sell the proceeds to buy back the yen in order to repay earlier borrowed yen loans Bank of Japan last week to keep interest rates unchanged at 0.5%, and President Toshihiko Fukui said there are no preconceptions about future interest rate hikes It is conceivable that the carry trade will continue in the future, with every strengthening of the yen becoming an opportunity to enter the carry trade. Even if the BOJ raises interest rates in August this year, it will only be a temporary setback to the carry trade, as the spread between the yen and other currencies is still large and does not change the long-term trend of the carry trade. Still dominate the market In June 2007, the European Central Bank raised interest rates by 25 basis points, but because the decision is nothing new, the euro subsequently fell instead of rising, but the RBNZ surprisingly raised interest rates so that the New Zealand dollar jumped based on the yens low interest rates carry trade is still active The European Central Bank on Wednesday as expected to raise interest rates by 25 basis points to 4.0%, the highest in nearly six years ECB President Trichet said after the meeting that The market believes that the ECB has not yet completed the process of raising interest rates and supports the market expectation that it will raise interest rates further as the rate hike was expected and did not give a clear hint on the outlook for interest rates beyond this year, prompting the euro to fall against the yen and the U.S. dollar ECB and raised its forecast for eurozone inflation this year The median estimate for this years inflation rate increased to 2.0% from 1.8% in March; the median estimate for this years eurozone economic growth rate is 2.6%, and the median estimate for next year is 2.3% The U.S. Department of Labor announced Wednesday that the first quarter non-agricultural productivity was revised to an annualized rate of growth of 1.0%, compared with the original growth of 1.7%; the first quarter unit labor costs The year-on-year rate of first quarter unit labor costs was revised to an increase of 1.8%, originally an increase of 0.6% EUR/JPY slipped about 0.35% to 163.47 yen EUR/USD once fell below $1.3500 to an intraday low of 1.3486, down 0.2% from Tuesdays end, closing at around $1.3506 JPY/USD also rose, up 0.3% to 121.05 yen RBNZ Thursdays surprise announcement of a 25 basis point rate hike to 8.0% to curb inflationary pressures from an overheated housing market and strong domestic consumption New Zealand dollar jumped after the announcement of the rate hike Thursdays Tokyo market, the euro is still weak market is still keen on carry trade, pushing the Australian dollar to a new 17-year high; and Australias employment surge last month, close to four times the estimated level, so the market is expected to further Australia in the near future Rate hike in the yens steady decline, a small correction is necessary, even though the Bank of Japan is expected to raise rates to 0.75% in August at the earliest, but its low earnings are unlikely to be favorable to the yen EURUSD than the last few changes late New York, close to 1.3505, off the three-week high of 1.3555 touched earlier this week USDJPY little changed at 121.10, off the EURJPY rose from near 163.50 to 163.60, off an intraday low of 163.10 and approaching Tuesdays record high of 164.62. Technically, EUR/USD: The euro revised down and fell toward target support at 1.3460, after the market is expected to continue to rise, breaking above $1.3515-55 and possibly further up 1.3600-10 U.S. dollars, after which will look up to 1.3680 if the support below the 1.3432 U.S. dollars lost, it may test the low of 1.3392-1.3406 U.S. dollars / yen: still bearish dollar support at 121.00/120.75 yen, after the market is expected to rise to 121.60, followed by 122.20 yuan market, the dollar against The middle price of the yuan at 7.6502, after the opening of the market selling pressure is heavy, the afternoon session in a wave of buying impact once high at 7.6560, closed back down to close at 7.6487
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