Heart of the Home Dining

With the recent volatility in the financial markets and the intervention of central banks, interest rate differentials are playing a large part in capital market flows. In particular, the Yen carry trade is at the top of the headlines. When volatility enters the market you get a situation where there is an unwinding of the Yen carry trade. When the carry trade gets put back on it is considered an indication that risk has left the market. Investors that are seeking a return on their investment borrow at low rates and invest in higher rates. This pays a return on their investment and offsets the cost of the borrowing.