Euro Carry Trade

www.TheForexNittyGritty.com - Euro Carry Trade Will 1% loans from the European Central Bank to struggling European banks result in stabilization of the European banking system or a Euro carry trade? The European Union has been in a sovereign debt dilemma for a couple of years. The Southern tier of EU nations, plus Ireland, has become the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) group. These nations, most notably Greece, would have been unable to finance their national debts without aid from lenders, the IMF, the European Central Bank and other EU nations in particular. The possibility of a breakup of the European Union or at least the departure of Greece and a couple of other nations loomed over the continent for the last few months. Just recently EU leaders met in Paris and agreed to amend the EU treaty to allow closer financial integration. (Read this as putting a cap on politically motivated pork barrel spending to buy local votes.) In addition EU members gave the European Central Bank greater authority and autonomy in dealing with the overall debt situation as many banks were weak and many considered a run on French banks a distinct possibility as many had invested heavily in bonds from Greece, Italy, and the others. But, just what does this have to do with a Euro carry trade? The expression, carry trade, is usually associated with the Yen and not the Euro. Japan has had extremely low interest rates for two decades. Investors holding Yen can engage in ...

View Count: 1 Date: December 27, 2011