By the editor 
Online commentators have suggested that July was a turning point, and that the recent unwinding of the yen carry trade might have triggered broader market upheavals. This would make sense as many borrowers took advantage of Japanese Yen linked debt being the cheapest in the world.
These professional traders leveraged all the capital possible and with it bought into high rising equities. Essentially, a Yen denominated loan was used to leverage into a stock position that was broadly emulated and resulting in many folks buying stock options and trades in the Nasdaq 100 companies.
The Perils and Possibilities of the Yen Carry Trade
The yen carry trade unraveling has been a suggested cause for the market disturbance, with multiple voices echoing this sentiment across the financial press. For instance, Bloomberg was among the more reputable entities to note that the Yen was already the subject of heavy speculation. It noted that the Yen carry trade was upset by the recent appreciation of the Yen by 10 percent relative to the dollar since July.
This state of affairs has led leveraged funds to shrink their yen net short positions, adding another element of uncertainty to the equation. Much of the discussion revolves around the potential for continued turmoil and the possibly ensuing recession. This may or may not be hyperbolic, but there is some justification to many thinking the expiration of this trade will lead to a slowdown in equity valuations globally.
Emerging from this is a pattern of response to general market news: the yen carry trade’s impact on a broader scale is believed to have been premeditated or even predicted by savvy investors. Different tweets demonstrate users’ skepticism of news following price, some even claiming that the unfolding carry trade was exploited for financial gain – this is also totally legal so who knows.
The Future of the Market
Within the array of expressed views, a common thread exists: the future is uncertain. Suggestions range from the possibility of a continued yen carry trade unwind, to the potential reconciliation of the Japanese and broader financial markets. What remains clear is this aligned uncertainty and anticipation for future changes, both in the yen carry trade and the larger financial market.