The Japanese yen has depreciated to 157.20 against the U.S. dollar, prompting speculation about potential intervention by the Bank of Japan. Traditionally, a weaker yen has been associated with risk-on sentiment, as investors leverage low-interest yen for higher-yielding investments. However, Japan's significant debt-to-GDP ratio and recent fiscal stimulus measures are raising concerns about the yen's long-term stability in carry trades.
Analysts are now considering the Swiss franc as a more reliable indicator of risk sentiment. The franc's lower yields and stable macroeconomic environment make it an attractive alternative, potentially reshaping traditional currency dynamics in global markets.
Yen Weakness Challenges Traditional Carry Trade Dynamics
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