Definition ∞ Yen carry trades are an investment strategy where investors borrow Japanese Yen at a low interest rate and convert it to another currency. These funds are then invested in higher-yielding assets or currencies abroad. The profit arises from the interest rate differential and potential appreciation of the invested currency. This strategy is sensitive to changes in global interest rates and currency volatility.
Context ∞ While not directly a crypto-native concept, yen carry trades often appear in broader financial news and can indirectly influence global liquidity, which affects digital asset markets. Shifts in the Bank of Japan’s monetary policy or global risk sentiment can impact the attractiveness of these trades. Reports sometimes discuss how the unwinding of large yen carry positions can lead to significant capital flows, potentially influencing the valuation of major cryptocurrencies as investors adjust their risk exposure.
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