TechFlow news, August 19 — According to Coindesk, the yen has strengthened 2.4% against the U.S. dollar since last Thursday, reaching 145 yen per dollar, reflecting increased demand for safe-haven currencies. A similar yen rally in early August triggered the unwinding of carry trades, causing significant volatility in risk assets including bitcoin. Bitcoin’s price dropped from around $70,000 to $50,000 over the eight days leading up to August 5, before rebounding to $60,000 as the dollar-yen pair recovered.
Prominent trader Simon Ree and Andrei Kazantsev, Goldman Sachs’ head of crypto trading, both noted that a stronger yen could trigger a negative feedback loop for global risk assets. According to ING analysis, the yen's rebound could shift market behavior, increasing the willingness to buy when the yen weakens, thereby amplifying risks of further yen appreciation.
In the coming weeks, as the Federal Reserve’s mid-September interest rate decision approaches, carry trade unwinding may continue. Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions, said that if the Fed cuts rates by 50 basis points, markets might initially rise then fall, as economic concerns combined with yen strength could reignite carry trade liquidations.
