NVIDIA Suffers Historic One-Day Market Value Loss
NVIDIA faced a record-breaking single-day drop in market capitalization, losing 9.5% and erasing $278 billion on Tuesday.
Image by Gerd Altmann from Pixabay
A near-global financial crisis. The recent market fluctuations have been significantly influenced by the well-known "yen carry trade."
This financial strategy involves borrowing Japanese Yen at near-zero interest rates and investing the borrowed funds in higher-yielding assets such as the USD at 5%, stocks, gold, and cryptocurrencies. While the exact scale of these trades is unknown, estimates suggest their total value ranges from over $4 trillion to as much as $20 trillion.
Bank of Japan's Rate Hike
The situation intensified when the Bank of Japan (BoJ) raised interest rates, exacerbating expectations of rate cuts from the US Federal Reserve. This rate hike led to a substantial appreciation of the Yen. As the Yen surged, traders involved in the yen carry trade were forced to close their long positions in various assets to repay their yen loans leading to the significant sell-offs observed on Monday, August 5th.
Potential Japanese Government Intervention
Navigating Complex Choices
Japan remains in a challenging position, trying to stabilize its declining currency without upsetting the US and global markets. All choices have severe potential consequences, leaving Japan with no easy options.
