Traders prepare for hawkish Bank of Japan as yen hits four-decade low

The Japanese yen just hit a level it hasn’t seen since Ronald Reagan was in office. At roughly 163.23 JPY per dollar, the currency is trading at its weakest point since late 1986, and banks are now telling their clients to brace for a Bank of Japan that’s finally ready to do something about it. For crypto traders, this isn’t just a forex headline to scroll past. The yen carry trade, one of the oldest and most popular strategies in global finance, has deep tentacles into Bitcoin and risk assets. When the BoJ tightens, those tentacles retract. The carry trade, explained Here’s the basic idea. Japan has offered rock-bottom interest rates for decades, making the yen an irresistible currency to borrow in. Traders take out cheap yen-denominated loans, convert that yen into dollars or other currencies, and park the money in higher-yielding assets. Stocks, bonds, crypto, you name it. The problem is when that equation changes. If the BoJ hikes rates or the yen suddenly strengthens, traders have to unwind those positions fast. They sell their risk assets to pay back their yen loans, and a lot of selling happens all at once. Bitcoin, being one of the most liquid and volatile risk assets on th...