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by Ashraf Laidi
Posted: Feb 11, 2009 13:54
Comments: 3
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This thread was started in response to the Hot-Chart:

USDNOK Position Trade

 
   
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Ashraf Laidi
London, UK
Posts: 0
15 years ago
Feb 12, 2009 9:34
JJ,

South Africa has had problems in keeping up with its historical role of #1 gold producer. The ZAR is no longer what it used to be pertaining to correlations with gold due to unrest, slumping econ growth and so on (more on that in Chapters 1 and 8 of my book). Again, the long NOK trade is a long term buy and hold trade.


AMIT,

thanks for your insightful question. Yes, it is true that 10-yield differentials are directly proportional to the currency with the higher spread. But as you correctly put it, the main difference emerges when rising yileds result largely from increased borrowing. This week, the US Treasury will raise a record $67 billion in borrowing (some for new borrowing and some for refunding its existing debt obligations). The way I see it is the following: rising US-EU spread may support USD vs EUR (or prevnt it EUR from regaining $1.31 right away) but the LONG TERM fundamentals of the US economy are negative.

Ashraf
Amit
Connecticut, United States
Posted Anonymously
15 years ago
Feb 11, 2009 16:52
As always, excellent analysis Ashraf.

There is something i wanted you to clarify if possible. Your comment in the last HOT-chart post "USD downside risks underlined by record Treasury borrowing, which is boosting yields at expense of USD. "

Know how short term forex traders consider the US-Euro 10yr yield spread, (which correlates inversely with EUR/USD pair), well, if the US yields rise faster than the Euro yields, US-Euro spread would be becoming more positive, therefore, a short EUR/USD action would present itself. Is the main difference in argument invalid due to a supply shock of Treasuries, where the private demand for Treasuries is insufficient or not attractive enough.

It just seems contradictory, so i presume there is something vital i am missing.
jj
New Jersey, United States
Posted Anonymously
15 years ago
Feb 11, 2009 16:33
do you think that long usdzar is an opportunity as gold makes this move? i understand that its illiquid to say the least but if it works ,it works
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