Certain carry trade strategies could contribute to financial market volatility and should thus be monitored by institutions responsible for financial stability. The volume of open carry trade positions also carries information about the risk appetite of investors. This contribution assesses the prospects for the Japanese yen carry trade on currency markets.‘Carry trade’ refers to a risky financial position in which an investor borrows in a low-yield instrument and invests in a high-yield instrument, or engages in a transaction similar to this. A bank borrowing from a central bank and lending these funds to its customers at a higher interest rate, or purchasing higher-yielding securities, is also a kind of carry trade. If customers repay and the securities do not default,… Read more
Bruegel blog
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Prospects for the yen carry trade
2nd February 2012
