A yen-focused carry trade that contributed to recent market turmoil as investors moved to unwind positions following a number of hawkish moves by the Bank of Japan and concerns over the US economy, is attracting renewed interest from hedge funds, according to a report by Bloomberg.
The report cites Nomura Holdings, Japan’s largest brokerage, as reporting that a range of investors, including corporate clients and hedge funds, are once again borrowing yen to invest in higher-yielding assets.
Antony Foster, head of Group-of-10 spot trading at Nomura in London, highlighted a “notable move back” into carry trades, particularly after US retail sales data surpassed expectations, prompting traders to reduce their bets on Federal Reserve interest rate cuts, pushing US bond yields higher and driving investors to sell yen in favour of currencies like the Australian dollar and the sterling.
ATFX Global Markets, an Australian online forex broker, has seen a 30% to 40% increase in yen short positions over the past week, largely driven by hedge funds and high-net-worth investors.
