1. Why are interest rates so low in the traditional core markets of USD and EUR?

2. What makes this "emerging market carry trade" so different from traditional forms of uncovered interest arbitrage?

Please write at least 1000 words

My answer is that but not enough

Q1 The interest rate in the US and Europe are markedly low now. In the Europe rate is the 0 and US rate is 1.25% (Media, 2017). This situation was largely driven by the financial crisis of 2007-2009, when both the US and Europe used financial mechanisms and interest rates to regulate the economy. According to the economic theory of Keynes, The fiscal policy is available to stimulate total demand and the employment of the economic recession period. Reducing interest rates encourages increased economic activity, more purchases, increased loans and more encouragement to economic organizations. Therefor both the US central bank and European central bank adjust interest rates gradually and close to zero then then governments of both the euroand US dollar support the banking system and ensure a reasonable level of liquidity.

Another reason is deflation. The weak economic growth that exists in the European and US markets also contributes to the tendency to keep interest rates low. It is a factor that makes the economic slowdown even more serious. In addition, investor activities are closely connected to the euro and the dollar. All of these factors put pressure on the financial markets of the US, Europe and other developed countries and contribute to the long-term movement to record low interest rate levels of these countries.

Q2 There are some different between traditional format interest rate arbitrage transaction and the emerging market carry trade strategy. Emerging market carry trade is to purchase other financial assets in emerging market by borrowing the currency of the country with the low interest rate .After holding the purchased financial asset for a certain period, it is sold. It is a trade aimed to profit from the difference between the quoted price at the time of purchase and the quoted price at the time of sale. This carry trade will benefit investors in higher yield interest and rising emerging market currencies, combined effects. This shows that the US economy and the euro countries have achieved relatively moderate economic growth due to the economic crisis since 2008 and major emerging market countries show the benefits of economic growth and new foreign direct investment.

In this case, The spot exchange rate INR / EUR has been strengthened from INR 60.4672 / EUR to INR 56 / EUR, and cases where there is an extra benefit when changing INR to EUR are very rare. The strategy aims to get high revenue against the increase of the Indian rupee against the euro. But normally carry trade is focused on earn the profit with interest differential between the two currencies

The main currencies (USD and EUR) give? inexpensive credits then exchange into currencies of emerging markets such as Indonesia and India, offer interest rates satisfactory to investment. Therefore, investors will benefit from interest rate differences and emerging market benefits..

Assignment Questions: Case 1 Mrs. Watanabe and the Japanese Yen Carry Trade At more than 1,500,000bn (some $16,800bn), these savings are considered the world's biggest pool of investable wealth. Most of it is stashed in ordinary Japanese bank accounts; a surprisingly large amount is kept at home in cash, in tansu savings, named for the traditional wooden cupboards in which people store their possessions. But from the early 2000s, the housewivesoften referred to collectively as \"Mrs. Watanabe\