Dislikedtdion...Great...Preciselly what the doc. ordered.
Carry trade should be looked into an yearly trade prospect than daily or monthly.
JP morgan et all have 2 trillion dollars on carry trade..the whole world economy is run on carry trade.
Japan is the sole provider of global liquidity.
Its a very very serious subject when interest rate hike comes for YEN than its for dollar.
Even, with a 0.25 points increase, the market will shake up..but as seen earlier this year, the market comes back to normal.
So, if you want to carry trade forget about the hedge..you are wasting your money there looking at zero interest hedge..just put that money "Bravelly" in the interest trade and Pyramid it. the risk will be for first six months..but with the extra interest and compounding you get ..you would very well cover up the 1000 PIPS dooms day buffer scenario easily for the next six months and after.
The whole world will tumble if Japanese decides to increase the interest rate to say 2 or 3 percent, they would do so eventually but very very slowlly in two or three years time....by this..the caryy trade will adjust to the shake up.
Japan is an export oriented economy..they will never commit a harikari..by increasing the rates substantialy...they would do it very very slow...incase the inflation heeats up..but they would ensure that the carry trade does not get efected.
The chance of losing a carry trade is very less compare to the daily loss we suffer intradayIgnored
i agree with you!