‘Carry trade’ collapse takes a toll on yen

[unhappycamper]

‘Carry trade’ collapse takes a toll on yen
By Erik Slavin, Stars and Stripes
Pacific edition, Saturday, January 3, 2009

An airman converting a paycheck into euros bought bratwurst in Germany a bit cheaper for a while in 2008, while a sailor in Japan now pays 20 percent more for sushi than in January.

That isn’t because the Germans bred too many pigs or because the Japanese have forgotten how to fish.

Both situations were partially due to the unraveling of an investment process known as the "carry trade" and fueled further by market uncertainty.

For many years, investors have borrowed money from stable countries offering low interest rates and then invested that money in countries promising higher yields.

The U.S. Federal Reserve’s low rates made the dollar attractive to borrow during the past decade, but the yen was the global investor’s darling.


Rest of article at: http://www.stripes.com/article.asp?section=104&article=59747