Explainer-What is the yen carry trade?
The yen carry trade, a popular investment strategy involving borrowing low-interest yen to invest in higher-yielding assets, is facing pressure due to potential Bank of Japan rate hikes. Investors are currently reconsidering their positions as the yen strengthens.
Why it matters
The unwinding of the yen carry trade can trigger significant volatility in global financial markets and impact currency valuations worldwide.
FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
TOKYO, Sept 9 : With the recent surge in Japan's currency to a seven-month high, investors are wondering if this is the beginning of the end of the yen carry trade that has been a pillar of global markets.
That trade, which involves borrowing yen at a low cost to invest in higher-yielding assets, is being undermined by expectations of accelerated rate hikes by the Bank of Japan, as early as its meeting next week.
Here is a deeper look at the yen carry trade.
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