QUICK SPARK: The Japanese Yen Hasn't Been This Weak In 40 Years
Piero Cingari 3 months ago
EconomicsEcon #sTop StoriesAsiaMacro Economic Events
The Japanese yen slid to 162.77 per dollar, its weakest level since late 1986, as the wide Fed-BoJ interest rate gap keeps fueling the carry trade.
The Japanese yen has slid to its weakest level since late 1986. As of Tuesday morning, it took 162.77 yen to buy a single U.S. dollar, a level unseen in nearly four decades.
Over the past five years, the dollar has strengthened by nearly 50% against the yen, driven by the wide interest rate gap between the Federal Reserve and the Bank of Japan.
The mechanism behind the move is called the carry trade. Investors borrow yen cheaply at Japan’s low rates and park the cash in dollars that pay far more, pocketing the difference.
Over the last twelve months, the Invesco CurrencyShares Japanese Yen Trust (NYSE:FXY) has lost nearly 10%.
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