oussama94
05-29-2017, 00:06
The data from this graph shows a mixed result. The Australian dollar
had the largest basis point spread and also had the highest return against
the U.S. dollar, which seems to vindicate the model as investors bought up
higher-yielding Aussie currency. The same can be said for the New Zealand
dollar, which also had a higher yield than the U.S. dollar and gained 27 percent
against USD. Yet the model becomes less convincing when comparing
the euro, which gained 20 percent against the dollar (more than every
currency except NZD) even though its basis point differential was only
100 points. The model then comes under serious question when comparing
the British pound and the Japanese yen. The yen differential is –100
and yet it appreciates almost 12 percent against the dollar. Meanwhile, the
British pound gained only 11 percent against the dollar even though it had
a whopping 275-point interest rate differential
had the largest basis point spread and also had the highest return against
the U.S. dollar, which seems to vindicate the model as investors bought up
higher-yielding Aussie currency. The same can be said for the New Zealand
dollar, which also had a higher yield than the U.S. dollar and gained 27 percent
against USD. Yet the model becomes less convincing when comparing
the euro, which gained 20 percent against the dollar (more than every
currency except NZD) even though its basis point differential was only
100 points. The model then comes under serious question when comparing
the British pound and the Japanese yen. The yen differential is –100
and yet it appreciates almost 12 percent against the dollar. Meanwhile, the
British pound gained only 11 percent against the dollar even though it had
a whopping 275-point interest rate differential