The yen may regain its status as the currency of choice for carry trades now that the G7 has intervened to halt its rise. Is another rush into global assets coming?
Investors often used the yen for carry trades, or sales of low-yielding currencies to buy higher-yielding, riskier assets, until the financial crisis. Then the Federal Reserve forced U.S. interest rates lower, and the yen appreciated sharply against the dollar and lost its appeal in carry trades.
But now that central banks have intervened to halt the yen's post-crisis rise, investors may well start using the yen for carry trades again.