Several months ago, I wrote a commentary piece on why it was wise for forex traders to abandon in the carry trade in favor of more innovative trading strategies.  I may have to eat my words, since interest in the carry trade hasn’t waned as expected, but rather has grown.  Economic data support the notion that the carry trade is almost fully responsible for the plight of the Yen, as Japan is experiencing a net outflow of capital on paper.  Anecdotal evidence is also abounding; dozens of forex firms have sprung in Japan to help retail investors take advantage of the declining Yen.  Meanwhile, when probed on the issue, the Chief Economist of the International Monetary Fund (“IMF”) indicated that he does not think it necessary for Japan to intervene in forex markets and prop up the Yen.  Dow Jones reports:

“The weakness of the yen in particular suggests that the forthcoming G7 meeting is having little impact on market psychology and focus is instead on declining volatilities, which has served to attract market flows back into carry trades.”

Read More: Interest In Carry Trades Likely To Intensify