Emerging-market carry trades—currency bets that typically involve borrowing in low-yield currencies such as the yen and investing in higher-yield markets—are holding up despite recent setbacks to the strategy, according to accounts from Bloomberg and The Japan Times. Both sources describe carry trading as a widely used foreign-exchange approach this year and note that the yen historically serves as a funding currency because Japan’s interest rates have been near zero for decades. Bloomberg adds that the appeal of yen-funded carry trades has been weakened after joint US–Japan currency intervention, which has dented the yen’s gains. Even so, investors continue to deploy carry strategies, suggesting they are shifting around the yen’s recent moves rather than abandoning the overall approach. Together, the reports frame the current environment as one where yen strength influences FX positioning, but carry trading remains active as market participants find ways to continue the trade despite intervention-related currency impacts.
Carry trades remain resilient as investors sidestep recent yen strength
Emerging-market carry trades—currency bets that typically involve borrowing in low-yield currencies such as the yen and investing in higher-yield markets—are holding up despite recent setbacks to the...
- Investors continue using emerging-market carry trades despite recent yen-related developments.
- The yen is traditionally a common funding currency for carry trades because Japan’s interest rates have long been near zero.
- Joint US–Japan currency intervention has affected the yen and reduced the appeal of yen-funded carry trades.
- Bloomberg reports carry trading remains resilient, with investors sidestepping yen gains rather than exiting the strategy.
The yen has traditionally been a go-to currency to fund carry wagers, given that interest rates in Japan were around zero for decades.
3 hours agoEmerging-market carry trades, some of this year’s most popular foreign-exchange bets, are showing resilience even after joint US-Japan currency intervention dented the appeal of this yen-funded strategy.
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