Everyone knows the yen had a big week. The bigger surprise is that the carry trade - a strategy built on borrowing that same yen - barely moved.
Here is how the trade works. You borrow money in a currency with a low interest rate, invest it somewhere that pays more, and keep the difference.
Japan's policy rate is 1%, the lowest among the Group of Seven. Decades of near-zero rates made the yen the currency everyone liked to borrow.
Last week, the yen touched about 164 per dollar, its weakest since 1986, before U.S. and Japanese officials stepped in together. By Wednesday, it was trading around 158.
A jump in the yen is the classic way this trade falls apart, because it makes the borrowed yen more expensive to repay. This time, the trade held its ground.
Bloomberg's gauge of emerging-market carry returns is down about 1% since the intervention. That roughly matches a G-10 currency benchmark.
Back in August 2024, a yen rally forced traders to close out yen-funded positions, and the same gauge dropped 4%. After that scare, investors spread their borrowing around.
Many now borrow euros and Swiss francs to buy high-yielding assets. The math helps: the euro-area benchmark rate is 2.25%, below the Federal Reserve's 3.5%-3.75% target range, so borrowing euros stays cheap.
Japan's rate is even lower than the euro area's, at 1%, but the Bank of Japan has hinted it could raise rates in September.
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The Brazilian real shows how much safer the setup feels. It has dropped 4% against the yen since the intervention.
But the real is roughly flat against the dollar and just 0.8% lower against the euro. The yen is doing the moving, not the whole trade.
Thierry Larose of Vontobel finances his emerging-market trades with dollars and euros, and he avoids betting against the yen. He thinks the yen is undervalued, and he is not convinced the Bank of Japan is "ready to turn hawkish."
"The bar for a disorderly carry unwind is higher than we thought a few weeks ago," he says. "For now, I'd carry on but stay away from the yen."
Banks are making similar adjustments. Wells Fargo is selling Swiss francs against the yen, expecting Japan's slow rate increases to keep the yen's interest rate above the franc's.
It targets the pair at about 188, a fall of nearly 4%, a level last reached in October.
Goldman Sachs said last month that carry conditions were the best in more than two decades, and it repeated in a late-July note that the strategy still had room to run. Goldman added one caution: choose your trades and borrowed currencies carefully, and keep an eye on local risks.
Goldman's order of preferred borrowed currencies starts with the Swiss franc, then the euro, then the Canadian dollar. Morgan Stanley told clients this week that the risk of more yen intervention favors the euro and the franc as the currencies to borrow.
A euro-funded basket of Brazilian real, Colombian peso, and Turkish lira has gained roughly 19% in 2026, the strongest year-to-date return since 2005. Standard Bank's Steven Barrow sees no reason to stop.
"Can the strategy continue to outperform? We see no reason why not," he says. "It seems that the trade has been impervious when any potential setbacks have occurred."
So what does this mean for your portfolio? The calm should not be confused with safety.
Some yen-funded trades still exist, and a sustained yen rally could still trigger forced selling. But Citigroup's Daniel Tobon says the setup is not what it used to be.
"It isn't like August 2024, when everything was funded out of yen," Tobon says. "We've seen a diversification of funding currencies, and that's likely to continue."
He notes that borrowing Australian dollars to buy currencies like the real still offers attractive returns.
The good news is that the market is spreading its risk around instead of leaning on the yen. For your portfolio, that means the next yen move might still sting, but it no longer has to break the trade.
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