hot money


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Hot money

Money that moves across country borders in response to interest rate differences and that moves away when the interest rate differential disappears.

Hot Money

Funds that an investor moves from one investment vehicle to another in response to higher interest rates. For example, an investor may move hot money from an investment-grade bond to a certificate of deposit at another institution where the certificate of deposit has a higher return. Likewise, one may move funds from one country to another when interest rates in the second country are higher. Hot money may be moved when a country or institution lowers its interest rates.

hot money

Funds that are controlled by investors who seek high short-term yields when the funds are likely to be reinvested somewhere else at any time. Some financial institutions attract hot money by offering above-average yields on certificates of deposit. However, if the rate is lowered, the funds are likely to be lost to another institution or investment.

hot money

short-term CAPITAL INFLOWS and CAPITAL OUTFLOWS between countries which occur in anticipation of likely EXCHANGE RATE changes (devaluations and revaluations), or in response to INTEREST RATE differentials between financial centres. See SPECULATION, ARBITRAGE.

hot money

short-term and volatile CAPITAL MOVEMENTS between countries that take place primarily in response to interest rate differentials between financial centres (ARBITRAGE) or in anticipation of likely DEVALUATIONS or DEPRECIATIONS and REVALUATIONS or APPRECIATIONS of foreign currencies (SPECULATION). Speculative hot-money flows are especially disruptive to the conduct of ‘orderly’ exchange-rate management and the maintenance of balance-of-payments equilibrium, and are thus sometimes subjected to FOREIGN EXCHANGE CONTROL regulation by the authorities. See CAPITAL INFLOW, CAPITAL OUTFLOW.
References in periodicals archive ?
Reminding Turkish Deputy Prime Minister Ali Babacan's remarks that government would not impose tax on money inflow into the country, Toguc said current account deficit would continue to be funded by the hot money in the short-term.
dollar, hot money may return to attack Asian currencies.
com include the Fat Fund Index, Family Advantage Index, and Hot Money Index.
The country's dependence on hot money flows into the stock market for financing the CAD sends the rupee into a tailspin as these funds can be withdrawn at short notice.
In mid-March, the People's Bank of China announced that the daily movement in the yuan/dollar rate would be increased from plus or minus 1 percent to plus or minus 2 percent to further dampen the enthusiasm of hot money speculators.
Even a current account surplus/oil and gas exporters are not immune to the chill from the emerging markets hot money exodus.
Death, jealousy, and hot money pepper this exciting and suspenseful novel, in which shifty humans may have as short a life expectancy as the racehorses they back
Emerging markets themselves, to a great extent, are responsible for the mess they are in now by over-depending on hot money inflows to boost growth at the expense of structural reforms.
For Turkey I guess this should be taken as a warning for Basci et al, that they have to reduce the current account deficit, narrow the external financing requirement and reduce dependency on hot money inflows - if they don't then when tapering actually comes they will be brutally exposed.
Firms know that as long as the hot money can reach mainland banks through Hong Kong, they can expect risk-free yields of more than 2 percent.
FINANCIAL DICTIONARY: HOT MONEY HOT money is an extremely short-term investment made by a lot of people simultaneously, usually in response to a big economic or political event.
Markets hate hot money as it creates volatility which may put off the more valuable longterm investors.