How Carry Trades Contributed to Global Market Chaos [Video]

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. This sell-off wiped out the Nikkei 225’s gains for the year.

A report from last week showed that the U.S. economy added 114,000 jobs in June, which was far fewer than expected and the U.S. jobless rate also climbed to its highest level since October 2021.

The steep declines were exacerbated in part, by a mass sell-off of U.S. dollars tied to carry trade deals that had previously propelled the markets to record highs.

Carry trades relate borrowing at low interest rates in …