Treasury Secretary Scott Bessent’s currency intervention has successfully strengthened the yen, sparking concerns that the resulting unwinding of carry trades will weigh on the S&P 500 and mega-cap tech stocks.
USDJPY dropped from 164 to 153 after intervention, and Bessent's comments suggest further yen strength, which would push the pair lower.
A stronger yen may force unwinding of carry trades, which could weigh on U.S. equities, particularly the S&P 500.
AI and technology stocks like NVDA could face selling pressure as yen-funded carry trades unwind.
Treasury Secretary Scott Bessent’s aggressive intervention in the yen has successfully pushed USDJPY from 164 to 153. Markets now brace for volatility as the unwinding of yen-funded carry trades threatens to pressure U.S. equities, particularly in the tech and AI sectors.
It is an investment strategy where traders borrow in low-yielding Japanese yen to invest in higher-yielding assets elsewhere. When the yen strengthens, these trades become more expensive to maintain, forcing investors to sell their assets to pay back the loans.