Exchange rates | The Economist

Exchange rates | The Economist:

"

Deutsche Bank, the world’s biggest forex trader, analyses the correlation between currency movements (against the dollar) and economic and financial variables. For the rich economies of the G10 the correlation has recently been strongest with inflation; in emerging markets sovereign risk (measured by credit-default-swap spreads) stands out. Countries with large current-account deficits, like Brazil and India, have seen their currencies slide in recent months. Currencies were negatively correlated with the level of short-term interest rates (a proxy for carry trade, whereby investors borrow in low-yielding currencies to fund purchases in higher-yielding ones): high rates coincided with weakening currencies."

'via Blog this'