Monday, June 25, 2007

The Yen Carry Trade: Alive and Kicking

The Yen has been sliding now for for nearly four months, ever since spiking in early March. That spike helped spark a dramatic selloff in the U.S markets, but those worries seem all but forgotten today.
The Yen has actually slid to a 4 1/2-year low versus the dollar. This indicates that the Yen Carry trade is alive and well, and that investor's have been zealous to borrow Yen to invest in higher-yielding assets.
The Yen has also hit its lowest levels versus the British pound since September 1992. The pound is one of the favored currencies used on the other side of the carry trade.
At some point, the Yen is likely to rally and concerns about the unwinding of this massive trade will resurface. But that is not today's issue.


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