The Yen carry trade

The Japanese Yen has fallen to 34 years low against the USD last Friday. The so-called carry trade – borrow Yen and invest in higher yielding assets in foreign currencies– simply remains too attractive for many investors to be ignored. A currency intervention by Japanese authorities may be in the cards to stop the Yen freefall. We however suspect government intervention may have limited effect and with the 3month US T-Bill standing at 5.39% this morning after the stronger US inflation data last week, the carry trade may go on for a while. Foreign investors into the Japanese equity market should take the currency into account …