Thursday, 25 October 2007
SORA rates driven by Fed's liquidity machine
The US Federal Reserve has pumped $25.5 billion in liquidity into the financial system so far this week, raising concerns of continued troubles in short-term funding markets.
The central bank released $8.5 billion in cash on Tuesday and $6.5 billion on Wednesday. The intervention came after the Fed pumped out $10.5 billion on Monday.
And look what happens to the SORA! (Singapore Overnight Rate Average). Singapore's soaking up all the liquidity. The possible explanation is this:
a. Singapore banks buys USD using SGD (last three days USD/SGD spiked up to 1.466 compared to the current 1.458)
b. MAS funds the SG banks SGD borrowings at lower rate to soak up the USD (lower SORA)
;-) a good way to profit if you know when the Fed is going to pump out more USD ...
Posted by Eaststopper at 01:04 0 comments