In 2008, the reason why the US dollar skyrocketed during the post Lehman incident was because of the gridlock in the US banking system which practically siphoned off global liquidity in the system.
The ensuing demand for cash unleashed a massive wave of demand for the US dollar. This scramble for cash led to a tsunami of selloff that resulted to a meltdown in the asset markets. The panic selling was specially sensitive on leveraged position such as the carry trade.
Today we have officials and experts who continually warn about carry trade bubbles.
This is the latest figures from the Bank of International Settlements which shows of external claims of BIS reporting banks.
This from BIS, (all bold highlights mine)
``Banks’ external claims continued to decline in the third quarter of 2009, falling by 1% ($235 billion) to $30.6 trillion. $36 billion of new claims on non-banks in emerging markets (up 3%) were balanced by $32 billion (down 0.4%) in reductions to non-banks in developed countries. Cross-border claims on banks in developed countries dropped by a further 1% ($181 billion) after a 2% decrease in the second quarter of 2009, and total interbank claims continued to decrease, although at a reduced pace, for the fourth consecutive quarter, by $224 billion or 1%
"Location of counterparties: Claims on non-banks in Latin America and Asia increased by $18 billion (7%) and $16 billion (6%), respectively.
"Instruments: Loans declined across all regions, while holdings of securities picked up everywhere except in offshore centres.
"Currencies: Banks’ cross-border claims denominated in US dollars increased for the first time since the third quarter of 2008, by $154 billion or 1%. This was more than accounted for by a $240 billion increase in US and Caribbean interbank claims on other Caribbean centres, the United States and the United Kingdom.
"Foreign currency claims on residents of reporting countries: Claims in US dollars, sterling, euros, Swiss francs and yen declined further, by $88 billion or 2% (after $65 billion in the previous quarter), while claims in other foreign currencies went up by $32 billion (14%)."
Given the figures and the charts above does this look anywhere like a carry trade?
Next we don't have another banking gridlock. What's being touted as the reason for the rally in the US dollar has been "tightening".
We think this is nothing but a hooey, see [What Has Pavlov’s Dogs And Posttraumatic Stress Got To Do With The Current Market Weakness?]
Beware of propaganda masquerading as analysis.
The ensuing demand for cash unleashed a massive wave of demand for the US dollar. This scramble for cash led to a tsunami of selloff that resulted to a meltdown in the asset markets. The panic selling was specially sensitive on leveraged position such as the carry trade.
Today we have officials and experts who continually warn about carry trade bubbles.
This is the latest figures from the Bank of International Settlements which shows of external claims of BIS reporting banks.
This from BIS, (all bold highlights mine)
``Banks’ external claims continued to decline in the third quarter of 2009, falling by 1% ($235 billion) to $30.6 trillion. $36 billion of new claims on non-banks in emerging markets (up 3%) were balanced by $32 billion (down 0.4%) in reductions to non-banks in developed countries. Cross-border claims on banks in developed countries dropped by a further 1% ($181 billion) after a 2% decrease in the second quarter of 2009, and total interbank claims continued to decrease, although at a reduced pace, for the fourth consecutive quarter, by $224 billion or 1%
"Location of counterparties: Claims on non-banks in Latin America and Asia increased by $18 billion (7%) and $16 billion (6%), respectively.
"Instruments: Loans declined across all regions, while holdings of securities picked up everywhere except in offshore centres.
"Currencies: Banks’ cross-border claims denominated in US dollars increased for the first time since the third quarter of 2008, by $154 billion or 1%. This was more than accounted for by a $240 billion increase in US and Caribbean interbank claims on other Caribbean centres, the United States and the United Kingdom.
"Foreign currency claims on residents of reporting countries: Claims in US dollars, sterling, euros, Swiss francs and yen declined further, by $88 billion or 2% (after $65 billion in the previous quarter), while claims in other foreign currencies went up by $32 billion (14%)."
Given the figures and the charts above does this look anywhere like a carry trade?
Next we don't have another banking gridlock. What's being touted as the reason for the rally in the US dollar has been "tightening".
We think this is nothing but a hooey, see [What Has Pavlov’s Dogs And Posttraumatic Stress Got To Do With The Current Market Weakness?]
Beware of propaganda masquerading as analysis.
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