@King0ftheCharts: .DO NOT IGNORE THIS WARNING...
@King0ftheCharts
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Dec 08, 2025
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DO NOT IGNORE THIS WARNING
Yen Carry Trade Unwind & Stock Market Selloffs
A rate hike by the BoJ on December 19th could start the unwinding of the Yen carry trade & disrupt the US stock market & Bitcoin.
There is a link between Yen carry reversals and S&P 500 selling off, with U.S. Treasury yields potentially jumping. The 10 yr yield looks ready to surge as it just broke out of a bullish falling wedge and then backtested it, forming an Inverse Head & Shoulders pattern.
The Yen trade unwind could have a ripple effect and tank the stock market, Bitcoin, cryptocurrencies and tighten global liquidity simultaneously.
Understanding the Yen Carry Trade
The Bank of Japan (BoJ) is likely to raise its policy interest rate to 0.75% from 0.5% at its meeting on December 18–19, 2025. This would be the first rate hike since January 2025.
Yen Carry Trade:
The U.S. stock market can go down when the Bank of Japan raises rates because it disrupts the popular yen carry trade, which involves borrowing yen at low interest rates to invest in higher-yielding assets elsewhere, like U.S. stocks. A rate hike makes yen more expensive to borrow, forcing investors to exit these leveraged trades, leading to sell-offs in assets like U.S. stocks and bonds. Additionally, a stronger yen can make other foreign investments more attractive, and higher Japanese bond yields can pull capital away from U.S. markets.
Here's how the Yen Carry Trade Works:
Investors borrow low-interest yen from Japanese banks. They convert the yen to a different currency, often U.S. dollars, and invest in higher-yielding assets, such as U.S. stocks or bonds. The profit comes from the difference between the low cost of borrowing yen and the higher return on U.S. investments.
Why a Japanese rate hike causes the U.S. stock market decline
Unwinding the Yen Carry Trade:
When the Bank of Japan raises rates, the cost of borrowing yen increases. This reduces the profit margin on the yen carry trade and forces investors to sell their U.S. assets to repay their yen loans. This selling pressure can drive down U.S. stock and bond prices.
A Strong Yen - Increased Borrowing Costs:
A stronger Yen makes it more expensive for U.S. investors to repay their Yen-denominated loans, forcing them to sell assets to cover their costs.
A weakening Yen (rising USD/JPY) fuels the Yen carry trade, while the unwinding of the carry trade strengthens the Yen (falling USD/JPY).
The Unwinding of the Yen Carry Trade During the 2007-2008 Global Financial Crisis
Unwinding of the Yen carry trade Intensified the stock market selloff during the 2007-2008 financial crisis.
While BofJ (Bank of Japan) rate hikes weren't involved in the unwinding the Yen carry trade during the financial crisis, the unwinding of the Yen carry trade did add to the volatility due to the Yen strengthening against the dollar.
During the 2007-2008 global financial crisis, the Japanese Yen appreciated significantly against the US dollar (with USD/JPY dropping from around 125 to 87, a decline of nearly 30%), which played a key role in triggering and exacerbating the unwinding of the yen carry trade. The Yen carry trade unwind contributed to the broader market meltdown for the U.S. stock market.
The unwinding of the Yen carry trade was a significant factor in the 2007-2008 global financial crisis, exacerbating the US stock market crash by forcing massive sales of global assets (including US stocks and bonds) as investors scrambled to buy back Yen to cover cheap loans, causing liquidity crunches and amplified market volatility, especially after the subprime crisis hit.
#Yen $USDJPY #BoJ $SPX $SPY #SP500 $BTC $BTCUSD #BTCUSD #Bitcoin #elliottwave $ES_F $QQQ $NDX #NASDAQ100 $NQ $NQ_F $NVDA #Trump #FOMC #Powell $AAPL $VIX #stockmarketcrash #stockmarket #Nvidia #Bullrun2025 #BullMarket
DO NOT IGNORE THIS WARNING
Yen Carry Trade Unwind & Stock Market Selloffs
A rate hike by the BoJ on December 19th could start the unwinding of the Yen carry trade & disrupt the US stock market & Bitcoin.
There is a link between Yen carry reversals and S&P 500 selling off, with U.S. Treasury yields potentially jumping. The 10 yr yield looks ready to surge as it just broke out of a bullish falling wedge and then backtested it, forming an Inverse Head & Shoulders pattern.
The Yen trade unwind could have a ripple effect and tank the stock market, Bitcoin, cryptocurrencies and tighten global liquidity simultaneously.
Understanding the Yen Carry Trade
The Bank of Japan (BoJ) is likely to raise its policy interest rate to 0.75% from 0.5% at its meeting on December 18–19, 2025. This would be the first rate hike since January 2025.
Yen Carry Trade:
The U.S. stock market can go down when the Bank of Japan raises rates because it disrupts the popular yen carry trade, which involves borrowing yen at low interest rates to invest in higher-yielding assets elsewhere, like U.S. stocks. A rate hike makes yen more expensive to borrow, forcing investors to exit these leveraged trades, leading to sell-offs in assets like U.S. stocks and bonds. Additionally, a stronger yen can make other foreign investments more attractive, and higher Japanese bond yields can pull capital away from U.S. markets.
Here's how the Yen Carry Trade Works:
Investors borrow low-interest yen from Japanese banks. They convert the yen to a different currency, often U.S. dollars, and invest in higher-yielding assets, such as U.S. stocks or bonds. The profit comes from the difference between the low cost of borrowing yen and the higher return on U.S. investments.
Why a Japanese rate hike causes the U.S. stock market decline
Unwinding the Yen Carry Trade:
When the Bank of Japan raises rates, the cost of borrowing yen increases. This reduces the profit margin on the yen carry trade and forces investors to sell their U.S. assets to repay their yen loans. This selling pressure can drive down U.S. stock and bond prices.
A Strong Yen - Increased Borrowing Costs:
A stronger Yen makes it more expensive for U.S. investors to repay their Yen-denominated loans, forcing them to sell assets to cover their costs.
A weakening Yen (rising USD/JPY) fuels the Yen carry trade, while the unwinding of the carry trade strengthens the Yen (falling USD/JPY).
The Unwinding of the Yen Carry Trade During the 2007-2008 Global Financial Crisis
Unwinding of the Yen carry trade Intensified the stock market selloff during the 2007-2008 financial crisis.
While BofJ (Bank of Japan) rate hikes weren't involved in the unwinding the Yen carry trade during the financial crisis, the unwinding of the Yen carry trade did add to the volatility due to the Yen strengthening against the dollar.
During the 2007-2008 global financial crisis, the Japanese Yen appreciated significantly against the US dollar (with USD/JPY dropping from around 125 to 87, a decline of nearly 30%), which played a key role in triggering and exacerbating the unwinding of the yen carry trade. The Yen carry trade unwind contributed to the broader market meltdown for the U.S. stock market.
The unwinding of the Yen carry trade was a significant factor in the 2007-2008 global financial crisis, exacerbating the US stock market crash by forcing massive sales of global assets (including US stocks and bonds) as investors scrambled to buy back Yen to cover cheap loans, causing liquidity crunches and amplified market volatility, especially after the subprime crisis hit.
#Yen $USDJPY #BoJ $SPX $SPY #SP500 $BTC $BTCUSD #BTCUSD #Bitcoin #elliottwave $ES_F $QQQ $NDX #NASDAQ100 $NQ $NQ_F $NVDA #Trump #FOMC #Powell $AAPL $VIX #stockmarketcrash #stockmarket #Nvidia #Bullrun2025 #BullMarket
