Yen Intervention Shifts Risks of Carry Trade

The US-Japan yen intervention has caused traders to become glued to one particular trade - the yen-funded carry trade.

The coordinated action saw the Japanese Finance Minister, Satsuki Katayama, confirm the operation and warn that the two countries could intervene again if needed.

The intervention led to a strengthening of the yen, which traded around 156.5 per dollar early Monday after weakening from above 163 before the intervention.

This has left investors watching whether the Bank of Japan raises rates again, making it more expensive to borrow yen and less attractive to fund investments overseas.

The carry trade remains attractive because US interest rates are still well above Japan's, but the coordinated intervention may have changed the risks of betting against the yen.