NEW YORK/SINGAPORE - This week's huge selloff in global markets, triggered by an unwinding of yen-funded trades, is far from over and could eventually spread to credit markets, impair some banks and possibly hurt the U.S. dollar, fund managers say.
"I think we've seen the panic stage of forced liquidation etc, but going forward I'm sure there will still be investors that are now looking to at least reduce exposure," said Khoon Goh, head of Asia research at ANZ.Hundreds of billions of yen found their way into juicy carry trades over more than a decade when Japanese interest rates were at zero.
It is also possible that Japanese investors will bring their massive Treasury and other overseas bond investments home, said Carlos Casanova, senior economist for Asia at UBP. "People who have currency positions, either outright speculative positions or they've been using the strategy to fund, they're going to be forced out of those trades. So that's the risk that I see.”Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.