Yen carry trade making a comeback

By Les Commons As if forgetting all the lessons of recent history, it appears many hedge fund managers are again piling back into the 'yen carry trade', the same trade rumoured to lie behind the demise of hedge fund behemoth Long Term Capital Management in 1998. With short-term interest rates in Japan at close to zero, banks and hedge funds are again financing positions in higher yielding currencies by borrowing in yen. This 'yen carry trade', as it is called, helps keep the yen cheap. The strategy assumes there is no risk the yen will appreciate, thereby causing growing yen liabi...