Offshore Yuan May Partly Replace Yen As Carry-Trade Funding Currency

Rising Japanese interest rates and a stronger yen could help offshore yuan partially replace the yen as a carry-trade funding currency, according to Bloomberg, Ming Pao reported. Japan's 10-year bond yield briefly approached 3% last week, a near 30-year high, while mainland China has kept monetary policy relatively loose and yuan rates low. The yuan rate was quoted at 1.692% today. Analysts cited by Bloomberg said the yuan may take over part of the yen's role as funding currency as exchange-rate volatility widens after central bank intervention to support the yen.