USD/JPY Carry Trade Intact as Risk Appetite Stays Firm
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Risk appetite across global markets has been buoyed by a string of bullish corporate updates, from AI infrastructure demand surges to unexpected earnings upgrades in the tech hardware space. That broader risk-on tone tends to reinforce the yen's role as a low-yield funding currency, with capital flowing out of JPY and into higher-yielding dollar assets, a structural tailwind for USD/JPY.
As long as equity markets remain resilient and volatility stays suppressed, the incentive to unwind yen carry trades remains low. Traders watching USD/JPY should treat shifts in global risk sentiment as a leading indicator, since any sharp equity drawdown historically triggers rapid, disorderly carry-trade unwinds that can send the pair sharply lower.