Saizeriya burned by yen carry trade

Saizeriya said it signed derivatives deals with BNP Paribas Securities (Japan) Ltd. twice, in October 2007 and February 2008, to procure Australian dollars needed to import food from that country. Under the deals, Saizeriya is to receive 1 million Australian dollars every month, payments of which started in September.

If the yen weakens below the level set in the contract, Saizeriya is entitled to buy the Australian dollars at a discount. But should the yen appreciate beyond that threshold, the purchase price rises.


4 thoughts on “Saizeriya burned by yen carry trade”

  1. This is kind of like United Airlines’ bad luck with fuel hedging. They didn’t hedge fuel until prices reached their maximum, then locked in their price right before prices began falling again.

    Shinsei were offering crazy interest rates for AUD/NZD time deposits earlier this year. It looked like a good deal to me at the time, but I figured there must be a volatility catch.

  2. Whatever happened to fiduciary responsibility? Is it common practice for money managers to approach institutional investors to invest in an asset class that’s at the height of bubble-inflated prices? There has been a string of reports that universities and small towns getting burned by risky investments.

  3. Everyone’s getting burned by risky investments. The sad fact is that even (supposedly) sophisticated institutions like Lehman Brothers got sloppy, let alone all the little players. Legally, most municipal governments and major companies are treated differently than, say, you and me when it comes to disclosure of investment risks.

    Anyway, for me, the bright side of this recession is that it’s calling out all the fakes in the financial industry, and giving the world a better idea as to which people actually know what they’re doing.

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