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Australia, on the cheap

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Australia, until recently, had very high interest rates. Japan had very low interest rates. Recipe for easy money:  borrow money in Japanese Yen, convert it into Australian Dollars and then invest it in Australia. This was called the “carry trade”. This was done by all self-respecting hedge funds who wanted to make a quick buck.

This trade recently came undone. Everyone has had to sell their Australian dollars and buyback Yen. The Australian currency has been crushed. Below is a chart of the Yen/ Australian Dollar exchange rate. Sydney for Christmas, anyone?

Japanese Yen / Australian Dollar Exchange Rate

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