Forex
Yen Carry Trade Unwind Accelerates, USD/JPY Hits 6-Month Low
The US holiday has caused thin liquidity in markets, which may have contributed to the significant drop in USD/JPY. The pair broke through the key 155.0 level and extended to 153.0 overnight. However, experts believe this is primarily a yen story rather than a broader shift in sentiment towards the dollar.
Fast money appears focused on a combination of a hawkish Bank of Japan and GPIF increasing domestic ownership. This has led to an acceleration in the unwind of the yen carry trade. Despite short-term fundamentals suggesting the move may be overdone, it remains risky to stand in its way.