Last week witnessed a sudden unwinding in the yen carry
trade, as a global market downturn affected investor sentiment towards
risk. Volatility is the only market
force that could seriously contend at collapsing the carry trade, and last week
produced significant volatility. All of
the world’s majors fell against the Yen, namely the New Zealand Kiwi, which
fell by 7.5%. The kiwi, you may recall,
has been one of the main currencies on the other end of the carry trade, due to
its high interest rates. However, analysts
are reluctant to proclaim an outright end to the popular carry trade,
preferring to wait and see how volatile the world’s capital markets appear in
the coming weeks. The Financial Times
reports:
The wave of risk reduction also prompted investors to take
profits in the Australian and New Zealand dollars, which have surged this year
from central bank credit tightening or expectations of more tightening to come.
Read More: Yen hits 3-month high versus euro
Original post by Jimmy Atkinson and software by Elliott Back
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