MrGecko(v2)
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Ok guys, I have a question that I hope a few of you will be able to answer.
RE: Implications of Interest rate moves on FX rates
Which term interest rate differentials have the most implications for FX moves? for example 3m USD vs 3m EUR? 2 Yr note yields vs Schatz? 10yrs vs Bunds?
... and which types of rate specifically, IBOR's, treasury yields? of course I expect any answer to begin with "it depends...", so who is going to be watching what? For example...
If there is an inflexion in 3m rates (as was the case w/ USD vs JPY last yr), will the implications of this be most for carry traders? (and so if this causes a move in the FX rate, can I attribute it mostly to putting on / taking off carry trades?)
As opposed to a shift in 10yr rates... are any moves this causes in USDJPY likely to be from RM bond portfolio's moving from one to the other (i.e. 10yr bonds into 10 yr JGB's)?
And comparing the two... is it the case that 3m rate differentials are behind moves more often than 10yr moves? Or will a shift in 10yr rates move the spot more than 3m rates?
Of course I appreciate that there are a whole host of other factors on both sides of the equation, and that these factors change the further you go out - but at some level there is causality there (is there??), and I wondered if any of you esteemed gentlemen might enlighten me as to which measures should get preferential treatment.
NB: Bear in mind that I only have access to retail information - STIR curves, US OTR yields, BBA rates and spot FX are about it. Best I can get in terms of a forward FX curve is the 3m spread on the futures.
RE: Implications of Interest rate moves on FX rates
Which term interest rate differentials have the most implications for FX moves? for example 3m USD vs 3m EUR? 2 Yr note yields vs Schatz? 10yrs vs Bunds?
... and which types of rate specifically, IBOR's, treasury yields? of course I expect any answer to begin with "it depends...", so who is going to be watching what? For example...
If there is an inflexion in 3m rates (as was the case w/ USD vs JPY last yr), will the implications of this be most for carry traders? (and so if this causes a move in the FX rate, can I attribute it mostly to putting on / taking off carry trades?)
As opposed to a shift in 10yr rates... are any moves this causes in USDJPY likely to be from RM bond portfolio's moving from one to the other (i.e. 10yr bonds into 10 yr JGB's)?
And comparing the two... is it the case that 3m rate differentials are behind moves more often than 10yr moves? Or will a shift in 10yr rates move the spot more than 3m rates?
Of course I appreciate that there are a whole host of other factors on both sides of the equation, and that these factors change the further you go out - but at some level there is causality there (is there??), and I wondered if any of you esteemed gentlemen might enlighten me as to which measures should get preferential treatment.
NB: Bear in mind that I only have access to retail information - STIR curves, US OTR yields, BBA rates and spot FX are about it. Best I can get in terms of a forward FX curve is the 3m spread on the futures.
