NEW YORK - Investors said the aftershocks of a massive carry trade that has reverberated through global financial markets wasn't done yet, with more unwinding in the days ahead raising the risk of shake-outs to other assets.trimmed losses by the close on Monday, capping off a brutal three-day selloff while Tokyo markets rebounded from a similar rout in trading on Tuesday.
The complete unwind of this yen-funded trade is likely to take days, potentially extending the market rout, Zhe said. Calculations made by hedge fund research firm PivotalPath show that hedge fund strategies most affected by a yen rally are global macro quantitative and managed futures, as they have short exposure to the Japanese currency. A spike in the yen this month indicates a loss of between 1.5% and 2.5% in August for those funds' indexes, according to the firm's exposure model.
Steve Sosnick, head trader at IBKR Securities Services, said trading Sunday night and on Monday's open"had the feel of forced selling." For some investors, the fact that the Nasdaq fell 10% below its record of 18,647.45 points on July 10 poses another challenge for a quick and sustainable bounce back.