Understanding the 'carry trade' strategy pushing the Japanese yen to historic lows
The Japanese yen has slumped to a 40-year low, a decline partly driven by a financial tactic known as 'carry trade.' Because the Bank of Japan maintains interest rates near zero, borrowing in yen is highly attractive when compared to the higher rates found elsewhere. Consequently, traders use this strategy to borrow yen cheaply and reinvest that capital into foreign currencies or assets that provide better returns.
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