subscribe: Posts | Comments

An explanation of the carry trade

Those of you watching recent events in the financial markets might have seen the terms ‘carry trade’, ‘Yen carry trade’ and ‘YCT’ crop up a few times. This is often explained in the press as the process of borrowing money in a low-interest currency and investing it in high-interest one. Which is true, but there’s rather more to it than that and we have to step back a few years to find the full explanation. About 20 years ago Japan went through a period of property price inflation, a speculative bubble of investment driven by people who assumed that property prices only went up, particularly on a crowded island where there was little scope to build new homes (sound familiar?)....

posted on: Sep 1, 2007 | author: Alex