Japan has been the only economy that has maintained a negative interest rate after the pandemic. Intended to incentivise spending and to make capital easily available, the rate had also pushed carry trade.
Carry trade is when the money is borrowed at the available negative rate from one country and invested into treasuries abroad where the risk-free returns are higher. Here, the investors could pocket the difference in interest rates and keep the cycle going.
The factors driving this inflow were the high bond yields offered by the US treasury and the strength of the dollar as a currency. In the past couple weeks, both these elements have changed.
The US dollar index slipped below the psychologically crucial 103 level to a day’s low of 102.65 in early Asian trade on Monday as recession fears in the US rose following weaker-than-expected US Jobs data. The yield on the 10-year US Treasury note extended its fall to 3.72%, the lowest level…
