What are carry trades and how did they contribute to this week’s global market mayhem? [Video]

Currency traders watch monitors near a screen, back, showing the Korea Composite Stock Price Index (KOSPI), top left, and the foreign exchange rate between U.S. dollar and South Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Tuesday, Aug. 6, 2024. (AP Photo/Ahn Young-joon) (Ahn Young-Joon, Copyright 2024 The Associated Press. All rights reserved.)

BANGKOK – The mayhem that swept across world markets this week was partly caused by a market strategy known as the “carry trade.”

Japan’s benchmark Nikkei 225 plunged 12.4% on Monday and markets in Europe and North America suffered outsized losses as traders sold stocks to help cover rising risks from investments made using cheaply financed funds borrowed mostly in Japanese yen.

Markets recovered much of their losses on Tuesday. But the damage lingers.

They were jolted by a combination of factors, including dread of a possible recession in the United States, the world’s largest economy, and worries that technology shares have shot way …

Tags Global Marketing, Marketing Strategies, Strategies, Strategy