Markets across the globe experienced chaos on Monday with some suggesting that this was caused by the strategy of carry trades.On Monday, stock markets across Asia plunged following the release of weaker-than-expected U.S. jobs data on Friday, which had a knock-on effect on the global economic outlook.Japan's Nikkei 225 index dropped by 13% at its lowest, which was its biggest single-day rout since 'Black Monday' in October 1987.
stocks and Treasury bonds, with the expectation of earning a higher return.The main driver of a carry trade is the disparity in interest rates between countries. The Bank of Japan, aiming to stimulate economic growth through increased spending, has maintained near-zero interest rates for years.Last week, however, it raised its primary interest rate from nearly zero. This hike typically strengthens a country's currency, leading to a surge in the Japanese yen against the U.S. dollar.