The United States and Japan carried out their first coordinated currency intervention since 1998 in early August, aiming to stabilize the yen and global markets. The Bloomberg EM FX Carry Risk Premia Index dropped only about 1%, whereas the yen rally in August 2024 had triggered a 4% decline in the same index. This limited market reaction is explained by the fact that carry traders have massively diversified their funding currencies, moving away from the yen toward the euro and the Swiss franc. This diversification severed the direct transmission mechanism between yen intervention and emerging-market asset prices, preventing a cascading liquidation event. For digital assets, this development means a more resilient carry trade ecosystem and one fewer source of systemic contagion for crypto portfolios.
Source: Read the original article
