The Aussie-Yen has plunged over 10%, a huge move in FX land, in just three weeks as the “Carry Trade” has been unwound in earnest. The market had been getting ahead of itself on the upside, and the crowded nature of the positioning has created almost panic selling in the last fortnight. The BOJ has cleaned up, having previously spent billions buying Yen to stem its currency’s recent declines.
NB The Japanese “Carry Trade” has been one of the most famous over recent years: Borrow money in a country with very low interest rates and then invest it in a country where you can get considerably higher returns. Japan’s interest rates have been around zero since 2016, so holding $US and $A has delivered a higher yield for literally years.
- We expect the AUDJPY to consolidate around the 100 area over the coming months.
MM is neutral on the AUDJPY sub-100
