General discussion (MEI), page-5385

MARKETS SHOW RELIEF AFTER YESTERDAY’S GLOBAL SELL-OFF

The effects of yesterday’s global sell-off appear to be easing on Tuesday. Risk gauges like the VIX, the yen and the Swiss franc have seen the selling hold up for the time being. The sharp global sell-off has been influenced by a number of factors but one stands at the heart of it, the BOJ carry tradeunwind.

With the Fed posturing up for a rate cut and the Bank of Japan normalizing its monetary policy through rate hikes, a drop in USD/JPY always seemed likely. However, the speed of its unravelling has shocked markets. For years investors took advantage of ultra-low interest rates in Japan to borrow yen and then invest that cheap money in higher yielding investments like stocks or even treasuries.
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