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 ?
Peso government securities accounted for 19 percent of hot money flows.
Owners of hot money are foreigners seeking quick returns.
52 million in hot money repatriations during the the first seven weeks of 2017.
Foreign portfolio investments are often referred to as hot money because these can enter and leave a market very easily.
Brokerage, said that these foreign financial flows are hot money led by a group of foreign institutions that aim to invest in MSCI index stocks and a number of blue-chip stocks.
A small rise in interest rates easily attracts a huge influx of foreign hot money, no matter what might be the domestic political issues in the interest-rate-raising country.
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.
Following the Philippine peso's recent sell-off as a result of strong hot money outflows following a bout of global risk aversion, we note that appreciatory and depreciatory forces on the currency are relatively in balance.
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.
First, an understanding of the rural Dagara's relationships to the ancestors and land allows us to grasp the notion of hot money and its various implications.
The economy has turned weaker due to its increased dependence on hot money flowing into stock markets from abroad to finance the record CAD, which had touched 6.
Markets hate hot money as it creates volatility which may put off the more valuable longterm investors.