Yen appreciation has carry-trade seekers looking at these two currencies

Live updates

1. 9d ago

   UBS views major yen carry trade reversal as unlikely

   UBS research indicates a major reversal of the yen carry trade is highly unlikely, despite an increase in Japanese government bond yields. This comes as investors restructure positions following the Bank of Japan raising policy rates to 1.25%. While offshore yen borrowing has hit 360 trillion yen and 4.61 trillion yen in bonds were sold during the week ending September 26, some analysts suggest the trade persists despite the narrower interest rate gap between Japan and the United States.

   Why it matters

   Carry trades involve borrowing in low-interest currencies to invest in higher-yielding assets. A rapid unwind can trigger volatility across global stocks and bonds as investors sell assets to repay loans.

   What is confirmed

   • The Bank of Japan raised policy rates to 1.25%.
   • Offshore yen borrowing has reached 360 trillion yen.

   Still unconfirmed

   • A major reversal of the yen carry trade remains highly unlikely according to UBS research.
   • Japanese bond sales totaled 4.61 trillion yen during the week ending September 26.

   What to watch next

   • Further policy rate adjustments from the Bank of Japan
   • Changes in United States interest rates
   • Shift in offshore yen borrowing totals
   Sources used for this update (2)

   1. finance.yahoo.com — What’s the likelihood of Yen carry trade reversing?
   2. www.xyplanningnetwork.com — The Yen Carry Trade and The New Cost of Capital | Balanced PM
   confidence 80%
2. 12d ago

   Investors shift carry trades as yen strengthens and rates rise

   The Japanese yen carry trade is under pressure as the Bank of Japan raises policy rates to 1.25%, narrowing the interest rate gap with the United States. This shift has prompted investors to restructure trades, with some seeking alternative funding currencies like the Swiss franc. While some analysts report the trade remains active despite narrower returns, significant capital outflows have occurred, including 4.61 trillion yen in Japanese bond sales during the week ending September 26. Offshore yen borrowing has reached 360 trillion yen, increasing the risk of a broader unwind.

   Why it matters

   Carry trades involve borrowing in low-interest currencies to invest in higher-yielding assets. For decades, the Bank of Japan maintained ultra-loose monetary policy, making the yen a primary funding source for global liquidity. A reversal in this trend can trigger systemic shifts in international capital allocation.

   What is confirmed

   • The Bank of Japan raised its policy rate to 1.25%.
   • Japanese bond sales totaled 4.61 trillion yen during the week ending September 26.
   • The yen is the third-most traded currency in the foreign exchange market.
   • Investors previously used cheap yen to fund investments in US Treasuries and emerging market bonds.

   Still unconfirmed

   • The yen carry trade unwinding risk remains low according to Woori Financial Research Institute.
   • The yen reached a 40-year low against the US dollar.

   What to watch next

   • Further Bank of Japan policy rate adjustments
   • Japanese government intervention in the currency market
   • Changes in the interest rate gap between Japan and the US
   Sources used for this update (13)

   1. www.cnn.com — The Japanese yen is at a 40-year low. Here's why that matters - CNN
   2. en.wikipedia.org — Japanese yen - Wikipedia
   3. finance.yahoo.com — USD/JPY (JPY=X) Live Rate, Chart & News - Yahoo Finance
   4. www.yensymbol.com — Yen Symbol ¥
   5. themoneyconverter.com — Convert from Japanese Yen (JPY) to United States Dollar (USD)
   6. wise.com — USD to JPY - Convert US dollars to Japanese yen - Wise
   7. fxnewsbias.com — JPY Neutral 45/100 | Bond Sell-Off and Safe-Haven, 10 Oct 2026
   8. en.infomaxai.com — 'Yen Carry Trade Unwinding Unlikely Unless Yen Appreciates 8 ...
   9. www.cheapertrader.com — How Japan’s Yen Strength Shift Is Reshaping Global Capital ...
   10. www.chosun.com — Bank of Japan Rate Hike Risks Yen Carry Trade Unwind
   11. menafn.com — Yen Carry Trade Remains Active Despite Narrower Returns
   12. www.ifre.com — Swiss franc threatens yen’s carry trade throne | IFR
   confidence 85%
3. 24d ago

   Yen Appreciation Shifts Global Carry Trade Funding

   Investors are restructuring carry trades as the Bank of Japan ends three decades of ultra-cheap money. The yen, previously the primary funding currency according to the Bank for International Settlements, is appreciating after the BoJ raised its policy rate to 1.25%. This shift has triggered significant capital outflows, including 4.61 trillion yen in Japanese bond sales during the week ending September 26. Traders who previously borrowed yen to buy higher-yielding assets in dollars, pesos, or reais now face higher borrowing costs and shifting asset prices.

   Why it matters

   For 362 months between October 1995 and November 2025, the Bank of Japan kept the average overnight call rate below 0.55 percent. This environment allowed Japan to act as a global lender, exporting cheap capital to increase leverage worldwide. The current rate hike marks a definitive exit from this zero-rate era.

   What is confirmed

   • The Bank of Japan raised its policy rate to 1.25%, the highest level in 31 years.
   • Foreign investors sold 4.61 trillion yen in Japanese bonds during the week ending September 26.
   • The US Federal Reserve maintains rates between 3.75% and 4.00%.

   Still unconfirmed

   • The monthly average of the overnight call rate steered by the Bank of Japan never rose above 0.55 percent from October 1995 to November 2025.

   What to watch next

   • Further policy rate adjustments by the Bank of Japan
   • Changes in US Federal Reserve interest rate targets
   • Shift in bond outflow volumes from Japanese markets
   Sources used for this update (3)

   1. www.litefinance.org — Yen Caught Between BoJ Caution and Shifting Carry Trade ...
   2. www.indrastra.com — Japan Has Left the Zero-Rate World. What Happens to the Yen ...
   3. www.cnbc.com — U.S. Dollar - CNBC
   confidence 90%
4. 26d ago

   Yen appreciation triggers carry trade shifts and bond selloffs

   The Bank of Japan raised its policy rate to 1.25%, the highest level in 31 years, as the yen experiences sharp appreciation. This shift is unraveling the traditional carry trade, where investors borrow in yen to invest in higher-yielding assets. In response, foreign investors sold 4.61 trillion yen in Japanese bonds during the week ending September 26, the largest weekly outflow since March. While the US Federal Reserve maintains rates between 3.75% and 4.00%, investors are repricing assets as the cost of borrowing in dollars increases.

   Why it matters

   Carry trades rely on low interest rates in funding currencies like the yen to maximize returns elsewhere. Rapid yen strengthening increases the cost of repaying these loans, which can force investors to sell global assets to cover debts. This creates volatility across US financial markets and other global currencies.

   What is confirmed

   • The Bank of Japan increased its policy rate to 1.25%, its highest level in 31 years.
   • Foreign investors sold 4.61 trillion yen in Japanese bonds in the week ending September 26.
   • The US Federal Reserve has set interest rates in the 3.75% to 4.00% range.

   Still unconfirmed

   • Japan may have intervened in the market with 35 billion dollars to support the yen.
   • The yen appreciated by 4 yen against the dollar in early September.
   • The euro has reached its lowest point in over 17 months against the dollar.
   • The Australian dollar hit a two-month low.

   What to watch next

   • Upcoming Bank of Japan central bank meetings regarding further rate hikes.
   • US Federal Reserve policy decisions on potential rate cuts before 2027.
   • Further data on foreign equity and bond outflows from Japan.
   Sources used for this update (13)

   1. www.thehindubusinessline.com — Stock Market Highlights, Sept 28: Sensex tanks 1,124 points, Nifty ends below 22,800 - The HinduBusinessL....
   2. www.mufgresearch.com — FX Quant - MUFG Research
   3. www.cnbc.com — Why Japan’s yen is weak and difficult to strengthen - CNBC
   4. www.condoredge.com — Yen Carry Trade Heatmap | JPY Funding Stress & Unwind Radar
   5. www.wsws.org — Pressures building up in yen carry trade - World Socialist ...
   6. finance.yahoo.com — Japan's steep yield curve opens 'reverse carry' trade ...
   7. www.wionews.com — What is happening with Yen? The real global economic shift ...
   8. economictimes.indiatimes.com — JAPANESE YEN CARRY TRADE - The Economic Times
   9. au.marketscreener.com — Why the yen can shake global markets | MarketScreener Australia
   10. ca.marketscreener.com — Why the yen can shake global markets | MarketScreener Canada
   11. in.marketscreener.com — Why the yen can shake global markets | MarketScreener India
   12. eimoh.com — The Yen’s 4-Yen Jump: Unraveling the Carry Trade Before the ...
   confidence 85%
5. 46d ago

   Yen Appreciation Prompts New Look at Carry Trades

   The Japanese yen is trading near a seven-month high ahead of upcoming central bank meetings, pushing speculators to turn net long on the currency for the first time since February. This sudden shift follows rising expectations of monetary tightening by the Bank of Japan and pressure from the United States, forcing yen shorts to unwind. While Asian currencies soften against a rising dollar, carry-trade participants are actively assessing alternative currencies to handle the currency's recovery.

   Why it matters

   Shifts in the yen carry trade carry global market implications because investors frequently borrow low-yield yen to fund investments in higher-yielding assets worldwide. The recent appreciation threatens to disrupt those established positions as traders confront a stronger Japanese currency. Financial institutions are split on the trajectory, with Morgan Stanley favoring trades anticipating the yen to weaken again.

   What is confirmed

   • Speculators turned net long on the yen for the first time since February.
   • The yen holds near a seven-month high ahead of upcoming Federal Reserve and Bank of Japan meetings.
   • Bank of Japan tightening bets and United States pressure sparked the yen recovery.

   Still unconfirmed

   • Morgan Stanley favors a trade position with the yen weakening to 163 per dollar.

   What to watch next

   • Upcoming Federal Reserve and Bank of Japan monetary policy meetings.
   • Further shifts in speculative net positions on the yen.
   Sources used for this update (7)

   1. Reuters — Speculators turn net long on yen for first time since February
   2. Bloomberg.com — Morgan Stanley Favors Trade With Yen Weakening to 163 per Dollar
   3. WSJ — Bank of Japan Tightening Bets, U.S. Pressure Spark Yen Recovery
   4. Reuters — Dollar steady, yen near 7-month high ahead of Fed, BOJ meetings
   5. CNBC — Yen appreciation has carry-trade seekers looking at these two currencies
   6. FOREX.com — USD/JPY outlook: Yen shorts flushed again as history points lower
   7. Investing.com — Asian currencies weaken as dollar rises, yen holds near seven-month high
   confidence 100%