TechFlow reported that on August 19, Coindesk reported that the yen-dollar exchange rate has risen 2.4% since last Thursday to 145 yen per dollar, showing a preference for safe-haven currencies. Similar yen strength triggered the unwinding of carry trades in early August, leading to sharp fluctuations in risk assets including Bitcoin. The price of Bitcoin fell from about $70,000 to $50,000 in the eight days before August 5, and then rebounded to $60,000 as the dollar rebounded against the yen.
Well-known trader Simon Ree and Goldman Sachs crypto trading head Andrei Kazantsev have both pointed out that the yen's strength could lead to a negative feedback loop for global risk assets. According to ING's analysis, the yen's rebound could change market behavior, increasing the willingness to buy when the yen weakens, thereby increasing the risk of a stronger yen.
The unwinding of carry trades is likely to continue in the coming weeks as the Fed approaches its mid-September rate-setting meeting. Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions, said that if the Fed cuts rates by 50 basis points, the market may rise first and then fall, as concerns about the economy and the strength of the yen will reignite the unwinding of carry trades.