Directional
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lol!
GJ, whats your take on a EUR/LVL carry trade? LVL is pegged in practice to EUR at 0.7 so in theory, the exchange rate risk is somewhat reduced, and LVL interest rates are rising rather fast
GJ, whats your take on a EUR/LVL carry trade? LVL is pegged in practice to EUR at 0.7 so in theory, the exchange rate risk is somewhat reduced, and LVL interest rates are rising rather fast
Arbitrageur/GJ,
If a currency is pegged as above but the domestic interest rate is rising, wouldn't this create some kind of structural stress?
Surely if a currency is pegged, wouldn't there be at least an implicit linkage between rates?
Presumably, intervention to maintain the peg would be relatively expensive if the domestic rate is higher (I'm assuming Latvia, for example, would need to borrow if there are insufficient funds).
Grant.
If a currency is pegged as above but the domestic interest rate is rising, wouldn't this create some kind of structural stress?
Surely if a currency is pegged, wouldn't there be at least an implicit linkage between rates?
Presumably, intervention to maintain the peg would be relatively expensive if the domestic rate is higher (I'm assuming Latvia, for example, would need to borrow if there are insufficient funds).
Grant.
GJ,
I wasn't making a comparison. It was the way problems unravelled and snowballed (as with the current CDO, etc crisis in the US).
I reckon China's Achilles Heel is it's property market - building projects half completed and abandoned, financed by massive debt, and still expanding. And isn't the government encouraging banks to finance businesses on a more relaxed basis?
Their massive wage inflation is already affecting exports. The clothing price constituent (significant Chinese exports)of the US CPI - hitherto, one of the most consistent disinfaltionary constituents - has turned inflationary, not seen since 1988. Of course, the weak dollar doesn't help, either
So when will the governnment start getting twitchy? They'll probably just cover it up until someone does the job for them, ie foreign investors will bail-out.
Sure these guys know their business, but it only works until it stops
Grant, Chief economist, Goldman Sachs.
I wasn't making a comparison. It was the way problems unravelled and snowballed (as with the current CDO, etc crisis in the US).
I reckon China's Achilles Heel is it's property market - building projects half completed and abandoned, financed by massive debt, and still expanding. And isn't the government encouraging banks to finance businesses on a more relaxed basis?
Their massive wage inflation is already affecting exports. The clothing price constituent (significant Chinese exports)of the US CPI - hitherto, one of the most consistent disinfaltionary constituents - has turned inflationary, not seen since 1988. Of course, the weak dollar doesn't help, either
So when will the governnment start getting twitchy? They'll probably just cover it up until someone does the job for them, ie foreign investors will bail-out.
Sure these guys know their business, but it only works until it stops
Grant, Chief economist, Goldman Sachs.
