Yen carry trade involves borrowing yen at low interest rates and investing it in higher-yielding currencies
Japanese Yen and US dollar banknotes are seen in this illustration taken March 10, 2023. (File photo: Reuters)
TOKYO — With the recent surge in Japan's currency to a seven-month high, investors are wondering if this is the beginning of the end of the yen carry trade that has been a pillar of global markets.That trade, which involves borrowing yen at a low cost to invest in higher-yielding assets, is being undermined by expectations of accelerated rate hikes by the Bank of Japan (BOJ), as early as its meeting next week.
Here is a deeper look at the yen carry trade.
How does the carry trade work?
