For decades the yen was one of the world’s most preferred funding currencies. Source: Bloomberg

For decades, the Japanese yen has been one of the world’s favored currencies for investors looking to borrow cheaply and put that money into assets offering higher returns. The strategy, known as a carry trade, tends to be popular when market volatility is low and interest-rate gaps between countries are wide, often because central banks are pursuing divergent monetary policies. One may be raising borrowing costs to combat inflation while another keeps them low to boost economic growth.

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