IDEAS home Printed from https://ideas.repec.org/p/boj/bojrev/rev16e07.html
   My bibliography  Save this paper

Recent Trends in Cross-currency Basis

Author

Listed:
  • Fumihiko Arai

    (Bank of Japan)

  • Yoshibumi Makabe

    (Bank of Japan)

  • Yasunori Okawara

    (Bank of Japan)

  • Teppei Nagano

    (Bank of Japan)

Abstract

The cross-currency basis, which is the basis spread added mainly to the U.S. dollar London Interbank Offered Rate (USD LIBOR) when the USD is funded via foreign exchange (FX) swaps using the Japanese yen or the euro as a funding currency, has been widening globally since the beginning of 2014. This development is driven by (1) increased demands for U.S. dollars resulting from a divergence in the monetary policy between the U.S. and other advanced countries, (2) global banks' reduced appetite for market-making and arbitrage due to regulatory reforms, and (3) the decrease in the supply of U.S. dollars from foreign reserve managers/sovereign wealth funds against the background of declines in commodity prices and emerging currency depreciations.

Suggested Citation

  • Fumihiko Arai & Yoshibumi Makabe & Yasunori Okawara & Teppei Nagano, 2016. "Recent Trends in Cross-currency Basis," Bank of Japan Review Series 16-E-7, Bank of Japan.
  • Handle: RePEc:boj:bojrev:rev16e07
    as

    Download full text from publisher

    File URL: http://www.boj.or.jp/en/research/wps_rev/rev_2016/data/rev16e07.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gustavo Adler & Carolina Osorio Buitron, 2017. "Tipping the Scale? The Workings of Monetary Policy through Trade," IMF Working Papers 17/142, International Monetary Fund.
    2. repec:wly:ijfiec:v:22:y:2017:i:4:p:394-402 is not listed on IDEAS
    3. William A. Allen & Gabriele Galati & Richhild Moessner & William Nelson, 2017. "Central bank swap lines and CIP deviations," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 22(4), pages 394-402, October.
    4. Petra Gerlach-Kristen & Richhild Moessner & Rina Rosenblatt-Wisch, 2017. "Computing longā€term market inflation expectations for countries without inflation expectation markets," Working Papers 2017-09, Swiss National Bank.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boj:bojrev:rev16e07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bank of Japan). General contact details of provider: http://edirc.repec.org/data/bojgvjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.