What are carry trades and how did they contribute to this week's global market mayhem?
The mayhem that swept across world markets this week was partly caused by a market strategy known as the “carry trade.”
Share:
More Stories
The mayhem that swept across world markets this week was partly caused by a market strategy known as the “carry trade.” Japan's benchmark Nikkei 225 plunged 12.4% on Monday and other world markets also suffered outsized losses as traders sold stocks to help cover rising risks from investments made using cheaply financed funds borrowed mostly in Japanese yen.
Markets were jolted by a combination of factors. That includes fears of a recession in the United States and worries that technology shares have shot way too high this year. But the scale of the declines was exaggerated by the rush to sell dollars due to carry trade deals that had helped drive markets to record levels.
