The Japanese yen fell significantly today against the other major world currencies as the fast growth on the Asian and European stock markets attracted more participants to the carry trade activities.
Yen was used as a low-cost borrowing currency to fund the high-risk assets, including such currencies as euro, pound and the Australian dollar. All those currencies rose good today against the yen. The U. S. dollar also gained from the carry trades, but its gain was limited due to the correction that it experiences on Forex after the growth last week.
Even the major investment banks are turning their heads towards the carry trade, using yen as a short currency, as the global stock markets improve and the risk appetite grows among the investors.
The current attractiveness of the carry trades is based on the interest rate difference between the Japan and the countries with the higher borrowing costs. The benchmark rate in Japan is 0.5 percent compared to 4 percent in the Eurozone, 5 percent in the United Kingdom, 7.25 percent in Australia and 2 percent in U.S.
EUR/JPY reached its highest value since November 7 2008 today — it rose from 166.43 to 167.36 as of 12:58 GMT with a daily high at 167.68. GBP/JPY soared to the highest value since February 27 — from 210.35 to 212.54 today. USD/JPY is currently trading near its open rate at 108.06 but the daily high was at 108.58. AUD/JPY rose from 101.50 to 101.76 today.
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