Dollar on Track for Fourth Straight Day of Gains as Carry Trade Almost Unwound — TradingView News

Popular carry trade has been unwinding, offering dollar bulls a chance to pocket some gains as yen moves to the downside.

• The USDJPY pair is treading volatile waters this week. On Thursday, the pair logged its third straight day of gains and was flaunting green Friday morning, en route for a fourth winning session. The popular forex trade kicked off the week with a massive selloff, which — added to the total drop over the past four weeks — nearly erased all dollar gains for the year. Earlier today, the pair jumped above ¥147.50 before sliding below the mark.
• Currency traders have been anxious to bet on the dollar ever since the Bank of Japan hiked rates due to something called “carry trade.” The carry trade, which largely led to the Monday drop, allows traders to borrow in a currency with low interest rates, like the yen, and reinvest the proceeds in a higher-yielding asset, such as the US dollar. The stampede from earlier this week was triggered by dampened returns in the carry trade as traders needed to pay off more expensive yen debts.
• In a report published Wednesday, banking giant JPMorgan said that about three-quarters of the global carry trade has been cleaned up. “Carry baskets already suffered a significant drawdown following the tech sell-off,” strategists at the investment firm said. “The spot component of the global carry basket would suggest that 75% of carry trades have been removed.”