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Case
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Reference no. 209-057-1
Authors: Bin Xu; Ying Liu
Published by: China Europe International Business School
Published in: 2009
Length: 16 pages
Data source: Published sources

Abstract

Since the beginning of the 1990s, Japanese interest rates have been among the lowest in the world. The yen carry trade refers to the activity of borrowing yen and investing in high-yield currencies, which brings profits if the interest rate difference is larger than the rate of yen appreciation. This case describes: (1) the rise of the yen carry trade when Japan entered a zero interest rate period in 1995; (2) the booming of the yen carry trade in 2002-2007 when hedge funds borrowed yen to chase the Australian dollar; (3) commodity and oil futures, and emerging market assets; and (4) the unwinding of the yen carry trade in 2007-2009 during the global financial crisis. The case includes 18 charts that illustrate various aspects of the yen carry trade and its impacts on the global economy, and one table that displays time-series data from 1981 to 2008 of interest rates and exchange rates of major currencies, and prices of oil and gold. The case can be used in courses of macroeconomics and international finance.
Location:
Industry:
Other setting(s):
1995-2009

About

Abstract

Since the beginning of the 1990s, Japanese interest rates have been among the lowest in the world. The yen carry trade refers to the activity of borrowing yen and investing in high-yield currencies, which brings profits if the interest rate difference is larger than the rate of yen appreciation. This case describes: (1) the rise of the yen carry trade when Japan entered a zero interest rate period in 1995; (2) the booming of the yen carry trade in 2002-2007 when hedge funds borrowed yen to chase the Australian dollar; (3) commodity and oil futures, and emerging market assets; and (4) the unwinding of the yen carry trade in 2007-2009 during the global financial crisis. The case includes 18 charts that illustrate various aspects of the yen carry trade and its impacts on the global economy, and one table that displays time-series data from 1981 to 2008 of interest rates and exchange rates of major currencies, and prices of oil and gold. The case can be used in courses of macroeconomics and international finance.

Settings

Location:
Industry:
Other setting(s):
1995-2009

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