Goldman Sachs said on July 10, 2026 that conditions for currency carry trades are the best since 2000, according to research cited by Bloomberg. The bank said it favors funding carry positions using the Japanese yen, Swiss franc, or euro over the coming months, and attributed the strategy's appeal to low volatility across G10 currency pairs Bloomberg.

A carry trade borrows in a low-yielding currency to fund positions in a higher-yielding one, capturing the interest rate differential — the spread between the two countries' policy rates — as long as the funding currency doesn't appreciate enough to erase the gain. Realized volatility is the trade's silent killer: low vol keeps spot moves contained and lets the carry accrue; a vol spike can wipe out months of gains in days. Goldman's framing that current conditions are "the best since 2000" is a statement about the vol backdrop as much as the rate differentials themselves.

The call follows a July 6, 2026 note in which Goldman cut its yen forecast, projecting depreciation to 165 per dollar within a year, citing Japan's interest rate differentials with the rest of G10 as the primary driver Bloomberg. A weaker yen forecast is functionally an endorsement of yen-funded carry: if the bank expects the funding leg to keep depreciating, the trade's total return improves on both the rate-differential and spot-appreciation legs.

This is not the first time in this cycle that the yen carry trade has drawn Goldman's attention, and the firm's own back catalogue is instructive. In a June 2024 piece on why the dollar was likely to stay "stronger for longer," Goldman flagged elevated carry trade interest as a direct consequence of high US rates Goldman Sachs. By August 2024, the bank was instead explaining a collapse: an Exchanges podcast featuring Goldman Sachs Research's Kamakshya Trivedi covered how the popular yen carry trade had unwound and why the unwind mattered for broader markets Goldman Sachs.

That 2024 unwind is worth recalling in some detail given how it propagated. Reuters reported on July 29, 2024 that a mix of political, policy, and technical risks upended global FX carry positioning, sending the yen surging off 38-year lows against the dollar Reuters. A week later, Reuters attributed the broader August 2024 equity market rout more to carry-trade deleveraging than to any standalone equity catalyst Reuters. Goldman's own "Is the Fed behind the curve?" Top of Mind report, published that September, characterized the episode as triggering a flight to quality, a selloff in risk assets, and a volatility spike Goldman Sachs. Separately, in June 2024, Mexico's peso dropped sharply after a landslide election result, and the resulting carry unwind rattled currencies as far afield as Hungary and Turkey Reuters — a reminder that carry unwinds tend to travel across unrelated currency blocs once cross-asset deleveraging sets in, not just within the original pair.

The trade's re-emergence tracks a broader pattern flagged in Reuters' May 2026 reporting, which described rate-based G10 carry trades — long high-yielders, short low-yielders — as having their best run in years Reuters. A December 2025 Reuters segment had already flagged the yen carry trade as a "sleeper" risk that could re-accelerate US inflation and "cause some real problems in 2026" Reuters — a forecast that reads differently now that Goldman is actively recommending yen-funded carry rather than warning about its unwind.

What stands out across this run of Goldman commentary since 2024 is the whiplash between endorsement and postmortem. The bank flagged carry appeal on rate differentials in mid-2024, explained its collapse two months later, and is now back to recommending the same funding currency it once cited as the epicenter of a global deleveraging event. None of this is contradictory on its own terms — carry trades are inherently regime-dependent, and low realized volatility genuinely does change the risk-reward calculus. But the 2024 episode is a case study in how quickly a low-vol, high-carry environment can invert once a political or policy shock forces a rapid unwind, and Goldman's own Top of Mind report on Fed policy is explicit that the mechanism runs through flight-to-quality flows rather than anything specific to the funding currency itself.

For desks running yen-funded carry today, the practical question isn't whether Japan's rate differential supports the trade — Goldman's 165 forecast says it does — but how quickly a vol regime shift could force the same kind of rapid unwind seen in July-August 2024, when a currency near 38-year lows reversed within weeks. The 2024 elections newsletter had already flagged this tension in February of that year, noting that carry positioning sits awkwardly against the elevated risk premiums embedded in forward rates, particularly as inflation falls and central banks approach cutting cycles Goldman Sachs. That structural tension between low realized vol and latent political/policy risk hasn't disappeared; it's simply being priced differently in July 2026 than it was two years ago.