Sunday, 6 September 2009

US dollar is becoming the new carry currency

It seems as though the US dollar is becoming the new carry currency. Also worth noting from this report from Bloomberg is the $70 billion of Treasuries that are up for auction this coming week.

“Judging by Libor rates, the dollar’s the new carry currency,” said Jessica Hoversen, a fixed-income and foreign- exchange analyst in Chicago at MF Global Ltd., a brokerage firm. “It’s the cheapest.” In the carry trade, investors borrow in nations where interest rates are low and buy assets where returns are higher, profiting from the difference.
The Australian dollar climbed 1.2 percent this week to 85.15 U.S. cents and advanced 0.6 percent to 79.21 yen. The South Pacific nation’s three-month bank-bill swap rate is 3.42 percent.

Gains in U.S. Treasuries were limited this week as the government prepared to sell $38 billion of 3-year notes, $20 billion in 10-year securities and $12 billion in 30-year bonds over three straight days beginning Sept. 8. The yield on the 10- year note fell less than 0.01 percentage point to 3.44 percent.

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