The Yen Carry Trade and Its August 2024 Unwind
How a low-volatility funding currency strategy built up for years — and what the August 2024 unwind taught about hidden leverage
On the morning of Monday August 5, 2024, the Nikkei 225 stock index opened lower in Tokyo and continued to decline through the trading session, closing at 31,458.42 — a 4,451.28-point decline from the previous Friday's close, or -12.
40%. This was the largest single-day percentage decline for the Nikkei 225 since the October 1987 'Black Monday' crash and the largest single-day point decline in the index's history (per Tokyo Stock Exchange historical data and Nikkei Inc. publications).
At approximately the same time across global markets, the VIX (CBOE Volatility Index, the implied volatility of S&P 500 options) reached an intraday peak of 65.73 — the highest level since the March 2020 COVID liquidity crunch and a level that had previously been observed only during the 2008 GFC and a handful of other crisis episodes (per CBOE historical data). USD/JPY, which had reached approximately 161 in early July 2024 (a multi-decade yen low), fell to approximately 142 over a few trading sessions — a 19-yen move, more than 12% yen appreciation in roughly a week (per FRED series DEXJPUS).
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 6 sections and ends with 6 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1How the August 2024 unwind happened — three drivers converging on August 2-5
- 2Carry-trade returns and unwind mechanics
- 3Major carry-trade-related unwind episodes — lineage and structural patterns
- 4August 5, 2024 — the day the yen carry trade caught up with itself
- 5Where to see this on the platform
- 6Summary