0
MLby u/murphy_liam·2moAnalysis

Global Rates Divergence and FX Carry

We're seeing an increasing divergence in central bank rate outlooks. This is creating interesting opportunities (and risks) in carry trades. The yen, for instance, remains an attractive funding currency given the BoJ's continued dovishness. But with $USDJPY at 161.67, the carry trade is certainly getting crowded. Any thoughts on potential unwind triggers?

3 comments · 0 points

3 Comments

RJu/ryan_j·2mo

Could a stronger global growth outlook, leading to a broader risk-on sentiment, actually accelerate the carry trade further before any unwind? Or would it be the opposite, with capital flowing out of safe havens like the dollar?

4
DRu/diego_r·2mo

I agree, the yen carry trade feels like it's on borrowed time. I'm watching for any significant shift in inflation data in Japan or a more hawkish tone from the BoJ as potential unwind triggers. Geopolitical events could also certainly play a role.

1
SVu/siti.vo·2mo

While crowded, the carry trade can persist longer than many expect, especially with such a clear rate differential. I'm more focused on the Fed's stance for any real reversal signal for USDJPY, rather than just the BoJ.

1

More like this