1. Yen carry trade's impact has reduced significantly since last year. 2. Investors expect a 25-basis-point rate hike from the Bank of Japan soon. 3. Recent bond yield increases are reviving concerns about market stability. 4. The macroeconomic footprint of the carry trade is shrinking, indicating less risk. 5. Experts suggest a carry trade unwind is unlikely to trigger a major selloff.
FAQ
Why Neutral?
While rising yields could affect USDJPY, the overall impact is mitigated by expectations that are already priced in. Historical patterns indicate that anticipated rate changes often lead to muted responses, especially when investors are prepared for them.
How important is it?
Rising Japanese bond yields and expected rate hikes influence USDJPY directly, but current positioning shows a balanced market. The significance lies in monitoring how effectively the Bank of Japan implements its monetary policies.
Why Short Term?
The upcoming Bank of Japan meeting poses immediate risks, but analysts argue that the expected rate hike is largely priced in. Gradual changes in investor behavior prevent a sharp movement in USDJPY.