Goldman Sachs Strategists Predict Further Unwinding of Japanese Yen Carry Trade
Goldman Sachs strategists are forecasting more movement in the Japanese Yen (JPY) carry trade unwind, despite significant recent shifts. The sell-off in the Yen has attracted attention to the ongoing trend and its potential duration. Limited data makes it challenging to predict, but key indicators suggest more to come.
In a recent note, Goldman highlighted a decrease in net short positions among non-commercial investors from nearly $15 billion to $1 billion. However, they believe the actual unwind may be less advanced, with substantial holdings in other investor segments. Foreign equity investments in Japan have surged, exposing around $1 trillion to potential losses if the Yen continues to strengthen.
While the Yen's recent correlation with Nasdaq declines may not solely be due to the carry trade, Japan's financial conditions could impact inflation and the Bank of Japan's rate hike plans. Goldman Sachs does not expect a rapid Yen strengthening unless there is a significant risk of a US recession.
Analysis:
Goldman Sachs experts predict further unwinding of the Japanese Yen carry trade, which could affect global financial markets. Investors should monitor Yen movements and potential impacts on equity markets and central bank policies to make informed decisions about their investments.