Share Market News: What is Yen Carry-Trade? How it Can Affect Market Trends?

Share Market Crash: On 5th August 2024, the global market saw a huge downturn, with the Nifty 50 dropping 600 points, and Sensex dropping 2000 points. Many reasons were considered behind this, including recession in the US, rising tensions in the Middle East, and more. The Yen Carry Trades are also considered one of the major factors in this crash. In this video, we will talk about Yen Carry-Trades, their definition, and how they can affect the stock market. 

What are Yen-Carry Trades?

The yen is Japan’s currency, and carry trades are a strategy in which investors borrow money at low interest rates and invest it at higher rates. Japan used to have extremely low or even negative interest rates, so traders would borrow yen cheaply and invest it elsewhere for better returns. However, on July 31, the Bank of Japan increased interest rates for the first time in 17 years. This change allowed traders to profit and repay their borrowed funds to the Bank of Japan. As a result, less money entered global markets, causing a worldwide sell-off.