http://www.reuters.com/article/2013/09/18/us-markets-forex-yen-idUSBRE98H03B20130918
(Reuters) - As the U.S. Federal Reserve looks set to begin whittling away at its stimulus in a first step towards eventual rate increases, the yen could see renewed interest as a funding currency for investments in higher-yielding currencies.
But any pressure on the yen from so-called carry trades is likely to be moderate compared with in the mid-2000s, when the Japanese currency weakened persistently on such trading, because current yield gaps between the yen and other major currencies remain too small, analysts say.
"Back in 2005-2007, only the yen had exceptionally low interest rates, making it a funding currency of choice," said Tohru Sasaki, head of Japan rates and forex research at JPMorgan Chase Bank. "But now there are other currencies that have low rates, so funding is likely to be more spread out among those currencies."
Analysts expect the Fed to trim its bond buying and forecast U.S. interest rates to rise substantially by the end of 2016 from current near-zero levels after its two-day policy meeting ending on Wednesday.
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