The bank of Japan raised their interest rates above 0 for the first time in like forever.
This has caused the yen to strengthen vs other currencies.
Because Japan had rates below 0 for so long, traders would get paid to borrow yen and then they’d trade those yen for other currencies and buy equities or other assets, to yield profits, and then they would trade those assets for profits and exchange the currencies to yen to the pay off the debt they borrowed from Japan
Since the yen is strengthening, and it’s no longer free to borrow yen, the forex exchange and borrowing costs ate into the profits hurt the trade, causing some to get margin called forcing them to liquidate their assets. This forced liquidation then cascaded lowering the value of equities overall, combined with a large amount of people in the trade, a run for the exits ensued to prevent greater losses
Tortuga / 🐢
npub1e3…0qvr5
2024-08-06 04:19:27
in reply to nevent1q…vp6w
Author Public Key
npub1e3mx09yq53gyh9368qyuhfstgk8t7p5vvfcnvgwa4994y7rqg37s20qvr5Published at
2024-08-06 04:19:27Event JSON
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"content": "The bank of Japan raised their interest rates above 0 for the first time in like forever. \n\nThis has caused the yen to strengthen vs other currencies.\n\nBecause Japan had rates below 0 for so long, traders would get paid to borrow yen and then they’d trade those yen for other currencies and buy equities or other assets, to yield profits, and then they would trade those assets for profits and exchange the currencies to yen to the pay off the debt they borrowed from Japan \n\nSince the yen is strengthening, and it’s no longer free to borrow yen, the forex exchange and borrowing costs ate into the profits hurt the trade, causing some to get margin called forcing them to liquidate their assets. This forced liquidation then cascaded lowering the value of equities overall, combined with a large amount of people in the trade, a run for the exits ensued to prevent greater losses",
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