The slowness of the Fed and the ECB in lowering their key rates is increasingly obvious, while the Bank of Japan and the Bank of Switzerland have already taken a head start. The latter two, with their extremely low rates, are promoting dynamic economic activity. The Swiss franc and the yen are benefiting from this, while speculation is raging. Let's now dive into the heart of the matter.
The strategy of finance through the “Carry Trade”
The Swiss franc and the yen, often compared to bitcoin (BTC), see their values soar through a liquidation of positions of “carry trade”. This technique popular with speculators consists of borrow in a low-yield currency to invest in a high-yield currency.
The Bank of Japan's policy rate ranges from 0% to 0.1%, while the Swiss National Bank's is at 1.25%. two of the lowest in the world.
Brad Bechtel of Jefferies explains: “ This is a liquidation of carry trade positions. »
Moreover, Offshore yuan is also a popular funding currency for this type of strategyAmong the destinations of choice for these speculators are the Brazilian real, the Mexican peso and the US dollar.
The Swiss franc gained 0.78% against the euro, reaching 0.9599 Swiss francs per euro.
The Japanese currency rose 1.06% against the dollar, reaching 153.96 yen per dollar.
Expected interventions and market reactions
The recent rise in the yen is attributed to the prospect of interventions by the Japanese authorities on the foreign exchange marketalthough the Japanese government has not confirmed anything. Japan plans to release data on its foreign exchange market activities on July 31, coinciding with the end of the Bank of Japan's monetary policy meeting.
Speculators anticipate an increase in the key rate of 0.1 percentage pointwhich boosted the yen. The institution will also have to clarify its strategy regarding the reduction of its purchases of Japanese sovereign bonds on the market.
Global finance is in turmoil, and all eyes are on these potentially decisive interventions.
As central banks move in divergent directions, the Swiss franc and the yen are gaining strength. Global finance is changing rapidly, and the cryptocurrency market is witnessing this.
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