并且，Currently, the average yield of the G10 group and emerging markets mmf exceeds 6%, while the benchmark interest rate of the japan central bank is only 0.25%. In addition to factors such as increased borrowing by the usa government and lower volatility in the mmf, analysis suggests that the yen carry trade may return to the levels seen earlier this year.
Is the yen carry trade back?
On December 3rd, Tuesday, according to Bloomberg's analysis of data from the Japan Financial Futures Association, Tokyo Financial Exchanges, and the USA Commodity Commission,Futures Trading Commission (CFTC)'s latest data shows that investors are significantly reducing their net short positions in US soybean, corn, and wheat contracts, easing bearish sentiment in the market.Japanese retail investors, leveraged funds, and overseas asset management companies increased their short bets on the yen to $13.5 billion in November, up from $9.74 billion in October.
Furthermore, Bloomberg expects these bets to continue rising next year due to the large interest rate differential between the USA and Japan, increased government borrowing in the USA, and low volatility in the money market, making it very attractive to borrow yen and invest in global markets with higher returns. Analysts believe that the yen carry trade may return to early this year’s levels.
Currently, the average yield of G10 and emerging market currencies exceeds 6%, while the Bank of Japan's benchmark interest rate is only 0.25%—even though the Bank of Japan is gradually raising rates, the interest rate difference compared to major economies like the USA remains significant.
Felix Ryan, an FX analyst at ANZ, stated that even if Japan raises rates to around 1%, the logic of arbitrage trading still holds. Alvin Tan, head of Asian forex strategy at the royal bank of Canada, said:
The absolute interest rate gap is very large compared to the yen, which means the yen will always be seen as a funding currency.
However, analysts such as Shoki Omori, chief japan strategist at Mitsubishi UFJ csi all share investment banking & in Tokyo, warn that Trump's return to the White House could create turmoil in currency markets, especially his rhetoric regarding tariff threats could lead to huge fluctuations in exchange rates, making carry trades less attractive.
Since the end of 2021, the roi for yen carry trades has reached 45%, while the roi for the s&p 500 index is 32%. Undoubtedly, this enticing roi has attracted an increasing number of investors, with short positions in yen reaching 21.6 billion USD by the end of July.
However, after the Bank of Japan raised interest rates in July, investors rapidly withdrew from yen carry trades, causing global stock markets to evaporate by about 6.4 trillion USD in three weeks, with the nikkei 225 index experiencing its biggest drop since 1987.
