Mitsubishi UFJ: Rising US Treasury yields and a stronger US dollar make the foreign exchange carry trade environment challenging.

Analysts at Mitsubishi UFJ Bank said in a report that the recent rise in US Treasury yields and the US dollar has created a more challenging environment for carry trades, which involve borrowing low-interest currencies to invest in high-interest currencies. "Supported by relatively low volatility in financial markets, including the foreign exchange market, carry trades have performed strongly this year." The outbreak of conflicts in the Middle East only caused a brief and mild increase in volatility in March. Expectations of a rate hike in the US before the end of the year have led to another increase in volatility.