Yen Rate Increase Leads to $500 Billion Trade Unwind, Investors Repatriate Funds
Sectors & Industries
August 12, 2024
For 30 years, Japan maintained a 0% interest rate on its currency, allowing investors to borrow yen at no cost and invest globally in assets like U.S. T-Bills and the Nasdaq.
Recently, the Bank of Japan (BOJ) increased interest rates by 0.25%, a nearly unprecedented move. This rate hike has caused investors to worry that their previously free capital is no longer free, prompting them to unwind trades and repatriate funds back to Japan.
The estimated scale of these trades is over $500 billion, highlighting the significant impact of the yen's interest rate on global financial markets.
This situation escalated earlier this week until the BOJ announced that they would be holding off on further rate hikes. There's a detailed description in our YouTube video.
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