The Yen-Carry Trades Has a Real Possibility of a Global Meltdown

The idea is that you borrow Yen at less than 2%, and invest it elsewhere at 4+%, and the difference is pure profit.

The problem? If the dollar, or Euro, or Yuan, falls relative to the Yen, you can end up way in the hole.

This is another problematic feature of the current world trade and currency system. To much speculation, not enough trade and investment, creating volatility and costs.

The increasingly leveraged monetary system is an act of keeping hundreds of balls in the air at the same time, and one day, they will come down.

Dollar Rises in Asia on Yen-Carry Trades
Friday June 8, 4:02 am ET
Dollar Rises in Asian Trading as Investors Swap Yen for Higher Yield Overseas Assets

TOKYO (AP) -- The dollar rose in Asia Friday as investors swapped the yen for higher yield overseas assets to take advantage of low Japanese interest rates.

The dollar was trading at 121.16 yen midafternoon, up from 121.11 yen late Thursday in New York. The euro fell to $1.3422 from $1.3432.

Traders said the dollar's climb likely wouldn't last, with a global stock fall expected to hurt sentiment for the dollar and the euro."