Can anyone help explain the Yen Carry trade, and it's relationship to the S&P 500?

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bizkitgto

My understanding is this:Yen is borrowed at near zero interest rates, then invested abroad, typically the SPX driving up the price. Then during times of crisis/risk investor's sell the SPX and buy back Yen, driving the yen price up. Any thoughts?
 
Typically, carry trades refer to buying bonds and such. Borrow yen at low interest rate, exchange it to US dollars (if US has higher interest rates), buy US bonds, earn interest rate difference as a result. This is the traditional low risk carry trade,

Your example I believe passes as a carry trade. Pre 2008 had similar examples that included emerging market stock purchases and others. It supposedly aggravated the bubbles and during the crisis, they did dump risky assets and bought back yen. Sounds like you understood it correctly.
 
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NeedToLearn said:
Your example I believe passes as a carry trade. Pre 2008 had similar examples that included emerging market stock purchases and others. It supposedly aggravated the bubbles and during the crisis, they did dump risky assets and bought back yen. Sounds like you understood it correctly.
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How could you pull off a yen-carry as a day-trader?
 
bizkitgto said:
How could you pull off a yen-carry as a day-trader?
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I never mentioned anything about pulling off carry trades as a day-trader? Carry trades aren't even meant for retail traders in general. It's mostly trying to "borrow" money cheap for the long-term so you can "invest" in high-growth and/or high interest environment. Only way a day-trader can take advantage I can think of is getting a feel for the flow of currency resulting from big carry trades and setting a bias, which I don't do.
 
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