The yen carry trade, which once stirred the storm of global markets, is now quietly recovering. In two weeks, the yen's exchange rate against the US dollar has fallen rapidly by more than 5%, which has attracted widespread attention.
According to observations by Nomura Holdings, Japan's largest brokerage, investors are borrowing yen again and investing in higher-yielding assets. This behavior marks the comeback of the carry trade. In particular, investors and hedge funds who are keen to profit from market fluctuations are quickly returning to this strategy.
In early August, Japan's tough monetary policy, coupled with the weak US economy and unsatisfactory employment data, once pushed the yen against the US dollar to a seven-month high. However, since August 5, the situation has changed rapidly, and the yen's exchange rate against the US dollar has fallen sharply in just two weeks.
Anthony Foster, head of 10-country spot trading at Nomura Holdings in London, pointed out that after the US retail sales data was better than expected, the carry trade has clearly returned, and investors have sold the yen and turned to more attractive currencies such as the Australian dollar and the British pound. In addition, rising US Treasury yields have also become a factor driving this trend. On August 15, the yield on the 10-year U.S. Treasury bond rose from 3.84% to 3.956%, while the yield on the two-year Treasury bond jumped from 3.966% to 4.126%.
The resurgence of carry trades highlights its appeal in the market. After all, this strategy can bring quick returns to investors. However, it is worth noting that this strategy is not without risks. Before the recent appreciation of the yen, traders generally bet on a depreciation of the dollar, but the Bank of Japan responded to rising inflation by raising interest rates. This action once again reminded the market that the potential risks associated with carry trades cannot be ignored.
