Yen warning from Morgan Stanley
According to Morgan Stanley strategists, the unwinding of yen carry trades continues to pose risks to equity markets.
Morgan Stanley strategists led by Mike Wilson reported that if the Fed cuts interest rates by 25 basis points in September, the risk of a sharp move in the Japanese yen will decrease.
The strategists recommended defensive stocks.
Following the Bank of Japan’s interest rate hike in July, carry trade positions taken by borrowing Japanese yen started to unwind in early August, accompanied by concerns over US growth, leading to a massive sell-off in global financial markets.
Recent developments in the yen have also led to a change in carry trade recommendations.
Some institutions, including Citigroup, Goldman and Nomura, recommended that carry trade transactions be made by borrowing yuan.
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