Carry Trades Wobble as Yen Swings Roil One of Year’s Best Bets
- Carry-to-risk ratio for yen-funded carry trades has slumped
- Risk-reward deterioration was driven by rise in yen volatility
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Japan is threatening to derail one of the most profitable currency bets this year: carry trades borrowing the yen to invest in emerging-market currencies.
A gauge of yen volatility jumped to the highest level since July this week as Japanese officials were suspected to have twice intervened to prop up the besieged currency. Yen-funded emerging-market carry trades are headed for a loss this week, with those targeting the Indian rupee and Colombian peso suffering among the biggest declines.