http://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?

2. 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?
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

3. THE EUROPEAN UNION HAS BEEN IN A
SOVEREIGN DEBT DILEMMA FOR A COUPLE
OF YEARS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

4. THE SOUTHERN TIER OF EU NATIONS, PLUS
IRELAND, HAS BECOME THE PIIGS
(PORTUGAL, IRELAND, ITALY, GREECE, AND
SPAIN) GROUP.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

5. 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.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

6. 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.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

7. JUST RECENTLY EU LEADERS MET IN PARIS
AND AGREED TO AMEND THE EU TREATY
TO ALLOW CLOSER FINANCIAL
INTEGRATION.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

8. (READ THIS AS PUTTING A CAP ON
POLITICALLY MOTIVATED PORK BARREL
SPENDING TO BUY LOCAL VOTES.)
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

9. 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
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

10. AND MANY CONSIDERED A RUN ON
FRENCH BANKS A DISTINCT POSSIBILITY
AS MANY HAD INVESTED HEAVILY IN
BONDS FROM GREECE, ITALY, AND THE
OTHERS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

11. BUT, JUST WHAT DOES THIS HAVE TO DO
WITH A EURO CARRY TRADE?
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

12. THE EXPRESSION, CARRY TRADE, IS
USUALLY ASSOCIATED WITH THE YEN AND
NOT THE EURO.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

13. JAPAN HAS HAD EXTREMELY LOW
INTEREST RATES FOR TWO DECADES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

14. INVESTORS HOLDING YEN CAN ENGAGE IN
FOREIGN EXCHANGE TRADING AND OBTAIN
US DOLLARS OR OTHER INTERNATIONAL
CURRENCIES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

15. THEN THE INVESTOR BUYS US TREASURIES
IF HE NOW HAS DOLLARS OR, PERHAPS,
ITALIAN OR GREEK NATIONAL DEBT BONDS
IF HE HAS TURNED YEN INTO EUROS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

16. ANYONE WHO BOUGHT DOLLARS BEFORE
THE RALLY LAST FALL AND THEN
PURCHASED TREASURY BILLS BEFORE
RATES FELL DID DOUBLY WELL.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

17. ON THE OTHER HAND MANY JAPANESE
REPATRIATED OFFSHORE ASSETS TO PAY
FOR THE DESTRUCTION OF THE WORST
EARTHQUAKE AND TSUNAMI IN THEIR
HISTORY.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

18. THIS YEN REPATRIATION SENT THE
CURRENCY UP DANGEROUSLY FAST.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

19. THE RISE IN THE YEN WAS ONLY HALTED
BY THREATS OF THE G7 MINISTERS TO
INTERVENE IN STRENGTH.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

20. ANYONE WHO HELD OFFSHORE ASSETS IN
A YEN CARRY TRADE DID POORLY AT THAT
POINT.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

21. THE POINT OF THE YEN CARRY TRADE IS
TO HAVE OR BORROW ASSETS IN A NATION
WHERE INTEREST RATES ARE LOW,
CONVERT TO ANOTHER CURRENCY, AND
INVEST WHERE INTEREST RATES ARE
HIGH.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

22. THE POINT IS ALSO THAT A CHANGE IN
CURRENCY RATES DOES NOT ERASE ALL
PROFITS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

23. THIS IS THE CONNECTION TO A SO CALLED
EURO CARRY TRADE.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

24. A CONCERN OF SOME IS THAT
STRUGGLING EUROPEAN BANKS THAT
HAVE RECEIVED 1% INTEREST LOANS MAY
BE TEMPTED TO INVEST IN HIGH RISK,
POTENTIALLY HIGH RETURN, DEBT.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

25. WHETHER THIS WOULD BE EUROPEAN
DEBT OR TO USE FOREIGN CURRENCY
TRADING IN ORDER TO PRACTICE A EURO
CARRY TRADE DEBT ELSEWHERE IN THE
WORLD
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

26. THE POTENTIAL FOR PROFITS COULD BE
GREAT, PROVIDING THAT THE GLOBAL
ECONOMIC PICTURE BRIGHTENS.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

27. ON THE OTHER HAND THE LOANS COULD
AMOUNT TO THROWING GOOD MONEY
AFTER BAD IF ANYONE TRIES SUCH AN
AGGRESSIVE AND RISKY STRATEGY.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

28. THE GOOD NEWS FOR THOSE FEARFUL OF
SUCH A SCENARIO IS THAT OVERNIGHT
DEPOSITS AT THE EUROPEAN CENTRAL
BANK ARE AT AN ALL-TIME HIGH.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

29. APPARENTLY MANY OF THE EUROPEAN
BANKS THAT NEEDED BAILOUTS HAVE
LEARNED THEIR LESSON.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

30. THEY ARE AVOIDING ANY SEMBLANCE OF A
EURO CARRY TRADE AND PUTTING THEIR
SHORT TERM MONEY IN THE MOST SECURE
LOCATION AVAILABLE, EVEN AT LOW
INTEREST RATES.
W W W . T H E F O R E X N I T T Y G R I T T Y. C O M

31. FOR MORE INSIGHTS AND USEFUL
INFORMATION REGARDING THE FOREX
MARKETS AND FOREIGN CURRENCY
TRADING, VISIT
WWW.THEFOREXNITTYGRITTY.COM.