Investment strategies for volatile markets
Global Investor, 03/2007 Credit Suisse
Global Investor, 03/2007
Credit Suisse
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GLOBAL INVESTOR 3.07 29<br />
1990s:<br />
New Millennium The JPY carry trade<br />
2000 until now. The JPY carry trade. Expansive monetary policy by Bank of<br />
Japan to fight deflation and ample global liquidity. Source: Bloomberg, Credit Suisse<br />
July 1997 Asian crises<br />
Fixed exchange rates and high interest rates in Asia led to capital inflows<br />
and large current account deficits. Source: Bloomberg, Credit Suisse<br />
EUR/JPY<br />
USD/THB<br />
170<br />
160<br />
150<br />
140<br />
The JPY carry trade<br />
50<br />
45<br />
40<br />
THB Devaluation<br />
130<br />
35<br />
120<br />
110<br />
100<br />
30<br />
25<br />
90<br />
20<br />
01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07<br />
EUR/JPY exchange rate<br />
01/97 01/98<br />
USD/THB exchange rate<br />
16/09/1992 Sterling ERM crisis<br />
High interest rates in the UK to maintain parity with the deutsche mark<br />
were incompatible with weak domestic demand in the UK.<br />
Source: Bloomberg, Credit Suisse<br />
January 1999 Brazil devaluation<br />
Quasi-fixed exchange rate replaced by inflation targeting policy.<br />
Source: Bloomberg, Credit Suisse<br />
GBP/USD<br />
USD/BRL<br />
2.20<br />
ERM crisis: GBP exit<br />
2.4<br />
2.2<br />
BRL Devaluation<br />
2<br />
1.70<br />
1.8<br />
1.6<br />
1.4<br />
1.2<br />
1.20<br />
1<br />
01/90 01/91 01/92<br />
01/93<br />
01/98 01/99<br />
01/00<br />
GBP/USD exchange rate<br />
USD/BRL exchange rate
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