Dallas Fed Sep Production Index

Dallas Fed Sep Production Index -0.5 Vs -9.7 In Aug

NEW YORK (Dow Jones)--Texas-area overall manufacturing activity was still contracting in September but production was close to neutral, according to a report released Monday by the Federal Reserve Bank of Dallas.

The bank said its production index for the current month rose to -0.5 from -9.7 in August, while its general activity index improved to -6.4 from -9.1.

In the report, readings below 0 indicate contraction, and positive numbers indicate expanding activity.

The Dallas Fed said hiring also showed some progress, though the index remained in negative territory. The employment index stood at -8.1 from -15.7 in the prior month.

The new-orders index turned positive in September, rising to 8.0 from -1.7 in August. The shipments index also turned positive, increasing to 0.3 from -11.2 in August.

The prices-paid index, at 9.8, was near the 9.9 reading of August, while the prices-received index was -17.9 from -21.4.The gap between prices paid and prices received indicates that, while energy prices may by pushing up input costs, companies still have little power to mark up the prices of their own products.

In August, the Dallas Fed began to include data based on seasonal adjustments.

 

What is a Carry Trade

Additional Information

What is a Carry Trade

All that is needed to understand the carry trade concept is a basic knowledge of foreign exchange and interest rates differentials. Each currency has a different interest rate attached to it determined partly by policy authorities and partly by market demand. When taking a foreign exchange position a trader holds long position one currency and short position in another. Each day, the trader will collect the interest on the long side of their trade and pay the interest on the short side. If the interest rate on the purchased currency is higher than that of the sold currency, the result is a net inflow of interest. If the sold currency’s interest rate is greater than the purchased currency’s rate, the trader must pay the net interest.

Carry Trade As A Strategy

For many years, money managers and banks have utilized the inflow and outflow of yield to collect consistent income in times of low volatility and high risk appetite. Holding only one or two currency pairs would invite considerable idiosyncratic risk (or risk related to those few pairs held); so traders create portfolios of various carry trade pairs to diversify risk from any single pair and isolate exposure to demand for yield. However, even with risk diversified away from any one pair, a carry basket is still exposed to those conditions that render this yield seeking strategy undesirable, such as: high volatility, small interest rate differentials or a general aversion to risk. Therefore, the carry trade will consistently collect an interest income, but there are still situation when the carry trade can face large drawdowns in certain market conditions. As such, a trader needs to decide when it is time to underweight or overweight their carry trade exposure.