Even though the joint intervention of the US and Japan in the foreign exchange market weakened the appeal of the arbitrage trading strategy funded in yen, the emerging market arbitrage transaction, one of the most popular transactions in the foreign exchange market this year, showed strong resilience. Since Japan boosted the yen exchange rate through direct intervention, the Bloomberg Emerging Markets Foreign Exchange Arbitrage Risk Premium Index has accumulated a cumulative decline of about 1%, about the same as the decline of similar benchmark indicators for G-10 currencies. This is in stark contrast to August 2024, when the yen appreciated sharply, prompting traders to scramble to repay yen financing, causing severe shocks in the global market. The emerging market arbitrage index once fell 4%. The market reaction was relatively mild, easing concerns about repeating the collapse of arbitrage trading in 2024. It also showed that investors have gradually reduced their dependence on yen financing and have instead used currencies such as the euro and the Swiss franc to invest and finance high-yield assets in emerging markets. Although the Brazilian real has fallen by 4% against the yen since the intervention in the foreign exchange market began, it is basically flat against the US dollar and only 0.8% against the euro.

Even though the joint intervention of the US and Japan in the foreign exchange market weakened the appeal of the arbitrage trading strategy funded in yen, the emerging market arbitrage transaction, one of the most popular transactions in the foreign exchange market this year, showed strong resilience. Since Japan boosted the yen exchange rate through direct intervention, the Bloomberg Emerging Markets Foreign Exchange Arbitrage Risk Premium Index has accumulated a cumulative decline of about 1%, about the same as the decline of similar benchmark indicators for G-10 currencies. This is in stark contrast to August 2024, when the yen appreciated sharply, prompting traders to scramble to repay yen financing, causing severe shocks in the global market. The emerging market arbitrage index once fell 4%. The market reaction was relatively mild, easing concerns about repeating the collapse of arbitrage trading in 2024. It also showed that investors have gradually reduced their dependence on yen financing and have instead used currencies such as the euro and the Swiss franc to invest and finance high-yield assets in emerging markets. Although the Brazilian real has fallen by 4% against the yen since the intervention in the foreign exchange market began, it is basically flat against the US dollar and only 0.8% against the euro.