Looking at the short to medium term interest rates in Japanese Yen and US Dollar, it is almost certain that the Fed will cut rates and the Bank of Japan will raise rates. The market is expected to be seeing this, so I would like to organize the recent trading process.
In carry trade, it has been reasonable globally to borrow low-interest assets and invest in high-interest assets to make a profit. Therefore, it was logical to borrow the low-interest Yen and invest in the high-interest Dollar.
Considering the recent policy changes of the Fed and the Bank of Japan, the flow has reversed, leading to a stronger Yen and weaker Dollar, reaching levels around 140 Yen per Dollar. It is now considered theoretically optimal to sell Dollars and buy Yen. In the very short term, I believe that Tokyo's price index and personnel changes in the US new administration were significant factors driving this.
Even if the Japanese yen interest rate reaches 0.5% and the U.S. interest rate reaches 3.5%, there is still a 3% interest rate difference between the two, so it is not enough to completely reverse carry trades. Therefore, it is anticipated that temporary yen strength and dollar weakness will occur, but this is expected to be limited. Even if the interest rate difference between the two disappears in the future, it is expected to happen quite far in the future, and during that time, the relative interest rates...