27th Jan 2011 article, FT Presented by Salik Ansari 5757

y The Basics y Currency y Carry Trade y Carry Trade & Exchange Rates y Egypt Carry Trade y Conclusion


Currency y Which quote is correct? USD/GBP GBP/USD 1.51258 1. 51258 .

Currency .

Currency y Currency Pairs Pair EUR/USD GBP/USD USD/CAD Rate 1.37917 1.61096 0.98364 .

Currency y If the GBP/USD exchange rate goes from 1.38017 Which currency has appreciated? .37917 to 1.

Currency GBP has appreciated! .

Currency Symbol USD EUR JPY GBP CHF CAD AUD NZD Country United States Euro zone Japan Great Britain Switzerland Canada Australia New Zealand Currency Dollar Euro Yen Pound Franc Dollar Dollar Dollar Nickname Buck Fiber Yen Cable Swissy Loonie Aussie Kiwi .

. then using it to purchase a financial instrument with a higher interest rate.Carry Trade y What is a Carry Trade? y A Carry Trade involves borrowing or selling a financial instrument with a low interest rate.

Carry Trade y The Yen Carry Trade y Borrowing in Yen. investing in other countries y When Yen down. world stocks up and vice versa .

Carry Trade & Exchange Rates y Exchange Rate is a big part of the Carry Trade strategy y Which country to borrow from? One with appreciating. stable or depreciating exchange rate? .

Carry Trade & Exchange Rates The one with depreciating exchange rate! .

stable or depreciating exchange rate? .Carry Trade & Exchange Rates y Which country to invest in? One with appreciating.

Carry Trade & Exchange Rates The one with appreciating exchange rate! .

Carry Trade y Which currency other than the Yen currently has low- yielding interest rates? .

Carry Trade The Dollar .


Egypt Carry Trade y Borrowed dollar at low-rates to buy higher yielding debt in the emerging markets y Egypt s central bank s benchmark interest rate 9.75 percent y Protests against Hosni Mubarak put Carry Trade into jeopardy .

Egypt Carry Trade y Foreign investors own about 20 percent of Egypt s short-term T-bills y Holdings in the past two years have soared from around E£5bn to over E£60bn ($10bn) .


higher than Iraq s.Egypt Carry Trade y The sharpest expression of the negative turn in sentiment is the cost of insuring against a sovereign debt default. the benchmark instrument for credit insurance in Egypt. They now stand at 347 basis points. have leapt nearly 29 per cent since Tunisia s president was overthrown on January 14 (graph on next slide). . y Spreads on five-year credit default swaps.


Egypt Carry Trade y Weakening of the Egyptian pound could set off a downward spiral y Even though Egyptian interest rates. thanks to the authorities y Rising core inflation y Locals started selling as well . the currency has been famously stable to the dollar.


53 World Stocks mostly down ECB rate rise hint rocks markets Receivables swell to Rs164.Week News y KSE 11.03 y NCCPL set to launch 3 leverage products: Margin Trading y y y y y y y System.223. Margin Financing System and Securities Lending and Borrowing USD/PKR Interbank market from 85.65bn: PSO may default on fuel supplies as crisis deepens All set to resume 2 pc monthly raise in power tariff Bringing Green Revolution: Interest-free loans for farmers demanded Commodity prices up .52 to 12.000. last Saturday to 85.67.

Agility to move towards Arbitration IMF to continue talks.Week News y Minorities Minister assassinated on Wednesday y Pakistan Automated Customs Computerized System (PaCCS) y y y y y chapter. a bane between Agility and FBR.5% markup and maturity of 32 years Egypt s PM resigned The Libyan Situation y y Britain froze Gaddafi s assets Gaddafi supporters attack protestors . even if oil price hike decision is withdrawn 50pc hike in POL prices withdrawn ADB agrees to provide $700m soft loan of 0. closed.

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