Japan Intervention Risks Derailing Emerging-Market Carry Trades.

Japan's potential intervention in the currency market is posing a risk to carry trades that involve borrowing the yen to invest in emerging-market currencies. Yen-funded carry trades targeting the Indian rupee and Colombian peso are experiencing significant declines. The carry-to-risk ratio for yen-funded carry trades has also fallen, indicating a worsening risk-reward for the strategy. However, some experts believe that the impact may not be as large as it could have been due to recent unwinding of carry trades. [Extracted from the article]