The popular ‘carry trade’ is unwinding — and economists fear Fed rate cuts could make matters worse
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Economists at TS Lombard warn that rapid interest rate cuts from the Federal Reserve could worsen the global 'carry trade' unwind; Carry trades involve borrowing in a currency with low interest rates and reinvesting in higher-yielding assets; Market participants are aggressively rolling back on carry trades following a global sell-off in risk assets; Stock markets in Europe are unsettled amid concerns of a US recession and the unwind of carry trades; Traditional safe haven assets like the yen and Swiss franc have surged as investors seek to unload carry trades; HSBC strategists warn of a 'triple whammy' of concerns: carry trade unwind, AI monetization, and a US recession; Economists hope for a coordinated message from the Bank of Japan and the Fed to soothe market nerves; The Japanese yen has risen sharply against the US dollar in recent weeks; Economists at TS Lombard say global assets look exposed and the carry trade has reawakened with a vengeance.

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https://www.cnbcafrica.com/2024/the-popular-carry-trade-is-unwinding-and-economists-fear-fed-rate-cuts-could-make-matters-worse/