Borrowing cheap yen to hold higher-yielding currencies
A carry trade borrows the low-yielding yen, converts it and holds a higher-yielding currency to collect the rate difference. The gap accrues steadily while it lasts, but a rising yen can wipe out that income at once. Because the same trade accumulates worldwide, an unwind can push the yen up very quickly.
Yen at 0.5% against a foreign rate of 5% leaves a gap of 4.5% a year.
For learning, not investment advice. Decisions are your own.
StockFit · TrueNorthLabs Inc.