Yen's Historic Reversal: The Carry Trade Collapse
In 2024, the Japanese yen delivered one of the most significant currency market reversals in recent memory. The currency surged from 130 to over 160 against the dollar as the decades-old carry trade unwound, triggered by the Bank of Japan’s shift away from negative interest rates and expectations of US rate cuts. This seismic shift upended a strategy that global investors had relied on for years.
While traditional forex models struggled to adapt to this fundamental regime change - from the yen as a funding currency to a potential carry target - Sumtyme’s mathematical abstraction approach cut through the complexity. Our framework focused on the underlying price dynamics, in contrast to getting caught in the narrative around central bank policy shifts and carry trade mechanics.
The model generated consistently accurate daily signals during both the yen’s steady appreciation and its periods of heightened volatility, identifying key turning points as the currency moved through critical levels. Most notably, our signals caught the major trend changes in April and July, providing clear direction even as market consensus struggled to adapt to the new paradigm.
This performance during the yen’s transformation demonstrates another key advantage of our mathematical framework - the ability to identify and track structural market shifts without being anchored to historical relationships or traditional market dynamics. While conventional models needed to be recalibrated for the new interest rate environment, our approach continued to deliver reliable signals through the entire regime change.