Stock Futures Plunge Amid Yen Carry Trade Unwind

According to BlockBeats, on January 27, Jacob King, the founder of WhaleWire, stated on social media that the sharp decline in stock futures is primarily due to yen carry traders being forced to liquidate assets, potentially leading to a tumultuous week. Jacob explained that in August 2024, Japan increased its interest rate from 0.1% to 0.25%, triggering a flash crash. Currently, Japan has raised the rate further to 0.5%, with a two-year yield at 0.71%. The higher interest rates in Japan are bringing an end to yen carry trades, where investors borrow cheap yen to invest in other assets. As borrowing costs rise, these investors are now compelled to sell assets to repay their loans.