Yen carry trade at risk of unwinding, Apollo's Slok warns

Investing.com -- Apollo Management's chief economist Torsten Slok has warned about the potential unwinding of the yen carry trade, pointing to recent sharp movements in speculative futures positioning.

"Speculative futures positioning has swung sharply, highlighting that carry trades can unwind quickly even as the broader yen-funded footprint remains in place," Slok wrote in a note.

Recent data from the Commodity Futures Trading Commission (CFTC) shows speculative investors have reduced their net short position on the yen to 70,552 contracts, marking the smallest bearish position in nearly a month.

Slok noted these flows stand in contrast with Bank of International Settlements balance sheet data, which indicates that yen lending to offshore financial centers and non-bank borrowers remains high, "suggesting a large stock of yen-funded positions."

The yen carry trade strategy, which involves borrowing in yen at low interest rates and investing those funds in other assets, has become a focus for investors amid this year's market volatility. The Japanese currency has strengthened by 1% against the dollar so far in 2026, with speculation growing that Japanese and U.S. authorities might directly intervene to prevent further yen depreciation.

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