Japanese Yen Gains in Forex Trading as Carry Trades Fall Out of Favor

by Trader Rich

Currency trading with the yenThe Japanese yen is gaining in forex trading on the currency market as carry trades continue to fall out of favor. Carry trades represent leveraged positions, and in this climate of risk aversion, many forex traders are de-leveraging as quickly as possible.

One of the drivers behind the current risk aversion is the fact that a global recession is seen as eminent. With this worry and the instability in the financial markets, it is no surprise that in currency trading the yen is on the rise with unwinding carry trades.

Bloomberg reports on the factors behind the rise of the yen in FX trading:

“These moves are due to extreme risk aversion, and have further legs,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd. “The credit bubble has truly burst and we’re seeing panic selling of risky assets that were bought with yen.”