7 August 2024
The Japanese yen’s recent strengthening against the US dollar has been closely linked to movements in US tech stocks and the broader market. This connection is largely due to the unwinding of the “carry trade,” where investors borrowed cheaply in Japan to invest in higher-yielding assets elsewhere. As Japan raises interest rates from near-zero levels, capital is flowing back into the yen, causing significant currency fluctuations and impacting global markets. This shift is reversing a long-term trend of yen weakness and dollar strength, leading to increased volatility in both currency and stock markets.