Yuan to surge as yen carry trade goes awry

TOKYO – Chinese regulators are worried about the impact of a stronger yuan on exporters. Those fears might be validated soon as the so-called “yen carry trade” goes awry across global currency markets.

Ever since the Bank of Japan’s July 31 interest rate hike, the yen’s resulting surge has upended foreign exchange markets.

Twenty-five years of holding rates at zero turned Japan into the globe’s top creditor nation, where for decades investment funds borrowed cheaply in yen to bet on higher-yielding assets worldwide. It became one of the globe’s most crowded trades, one uniquely prone to correction where sudden moves in the yen slammed markets virtually everywhere.