Description
FXStreet analyst Dhwani Mehta details how the Bank of Japan’s sustained near-zero interest-rate regime has enabled a massive yen-funded carry trade that has persisted for decades. Hedge funds, pension funds, and global portfolio managers borrowed Japanese yen at negligible cost, converted the proceeds into US dollars, and allocated capital to higher-yielding instruments, including US Treasuries, Nasdaq-listed equities, emerging-market sovereign bonds, investment-grade corporate credit, and cryptocurrency positions.
The mechanics are straightforward yet powerful: the spread between a near-zero funding cost and the coupon or capital appreciation available in dollar-denominated risk assets creates a persistent bid underneath global markets. The Swiss franc has operated in parallel as another low-yielding funding currency, broadening the base of cheap liquidity that supports cross-border positioning.
Are higher yields killing the carry trade for good? 📉
#JPYCarryTrade #USTreasuries #Nasdaq