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 data analysis from Bloomberg on the Japan Financial Futures Association, Tokyo Financial Exchange, and the U.S. 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 short positions on the yen to 13.5 billion USD in November, up from 9.74 billion USD in October.
Moreover, Bloomberg expects these positions to continue rising next year due to the large interest rate gap 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 higher-yield markets. Analysts believe that the yen carry trade may return to levels seen at the beginning of this year.
Currently, the average yield of G10 group and emerging market currencies exceeds 6%, while the Bank of Japan's benchmark interest rate is only 0.25%—although the Bank of Japan is gradually raising rates, the interest rate gap with major economies like the USA remains significant.
Felix Ryan, a forex analyst at ANZ Bank, states that even if Japan raises its interest rates to around 1%, the logic for arbitrage trading still holds. Alvin Tan, head of forex strategy at royal bank of canada in Asia, stated:
The absolute interest rate difference is very large when comparing other mmf with the yen, which means that the yen will always be seen as a funding currency.
However, analysts such as Shoki Omori, the chief japan strategist at Mitsubishi UFJ csi all share investment banking & in Tokyo, warn that Trump's return to the White House could plunge the currency market into turmoil, especially his threats regarding tariffs could lead to huge fluctuations in exchange rates, making carry trades less attractive.
Since the end of 2021, the roi of yen carry trades has reached 45%, while the roi of the s&p 500 index has been 32%. Undoubtedly, this attractive roi has drawn an increasing number of investors, with short positions in yen reaching 21.6 billion dollars by the end of July.
However, after the Bank of Japan raised interest rates in July, investors rapidly withdrew from yen carry trades, leading to a global stock market evaporation of approximately 6.4 trillion dollars within three weeks, with the nikkei 225 index experiencing its largest drop since 1987.
