Well, shit.

[maradydd]

By way of ernunnos, the dollar is now the currency of choice for carry trades.

Poll

Comments

Re: Idle question considers the wisdom of switching to "drive"

[maradydd]

"Out of FOREX" is kind of a weird way of putting it, since the whole point of a dollar carry trade is doing your FOREX transactions in dollars instead of euros or NZD or whatever (because in FOREX you're going to have some currency sitting idle for brief periods of time, and you want that to be a low-interest currency). The dollar's actually fallen against most major currencies in the wake of this IMF announcement, but I think you're right that using it as a carry instrument is keeping it from falling farther -- if people are going to buy dollars to use them as a common currency for FOREX transactions, they want those dollars to maintain some buying power from one day to the next.

I don't know if anything can stop a dollar crash when the carry trade ends. That's usually the end state of a carry trade unless something else has happened to prop up the real assets of the issuing country -- domestic asset valuations go straight to hell. (Japan is a valuable case study for this, as their carry trade ended during the real estate bubble.)

I think all that setting the standard price of oil in other, more stable currencies would do is get rid of the illusion that the real price of oil is stable, and none of the major players want that.

Re: Idle question considers the wisdom of switching to "drive"

[vatine]

Well, being part of the carry trade would, sort-of (if I've read and reasoned correctly) that it tends more towards sitting around for MUCH longer than normal FOREX trades.

I have a vague recollection of OPEC discussing setting their barrel prices in Euros, a year or two ago, don't know if anything ever happened about it.