Yen Rally Forces a Carry-Trade Retreat
The yen strengthened to 152.89 per dollar, its highest level since February, after trading near 160 less than a week earlier.[1] Expectations of a Bank of Japan rate increase, early signs of capital repatriation and intervention risk are prompting traders to unwind positions financed with low-cost yen borrowing.[1]
A stronger yen raises the cost and risk of a strategy widely used to finance investments in higher-yielding currencies and assets, potentially transmitting Japanese policy shifts across global markets.[1]
Key insights
- The rally follows the yen’s slide to 40-year lows in July and a joint U.S.-Japan intervention.[1]
- Investors are reluctant to rebuild short-yen positions because another intervention remains a risk.[1]
- The yen also strengthened as broader markets absorbed higher oil prices and rising bond yields, reaching 154.76 per dollar during the cited session.[3]