Goldman Sachs said on July 10, 2026 that currency carry trades are in ideal conditions, the best since 2000, according to Bloomberg. The bank recommends using the Japanese yen as the funding currency for these trades over the coming months.

Here's how a carry trade works. You borrow money in a country where interest rates are very low—like Japan—and invest it in a country where interest rates are much higher. You pocket the difference between the two interest rates. The danger is that if the cheap currency (the yen, in this case) suddenly strengthens, you lose money on the currency swap and erase your interest profit.

Right now, Goldman sees calm in the market—what traders call "low volatility." That calm is what makes carry trades safe and profitable. When volatility is low, currency prices don't swing wildly, so the interest profit piles up without interruption.

On July 6, Goldman cut its forecast for the yen, predicting it will weaken further, to 165 per dollar within a year Bloomberg. If the yen does weaken as forecast, yen-funded carry trades would profit on two fronts: the interest rate difference between Japan and other countries, plus the currency movement itself.

But this isn't Goldman's first time recommending yen carry trades. In June 2024, the bank flagged these trades as attractive because US interest rates were so high Goldman Sachs. Just two months later, in August 2024, Goldman was explaining why the trade had fallen apart Goldman Sachs.

What happened in 2024 was sudden and harsh. On July 29, 2024, a political shock in Japan and other policy changes sent the yen soaring—moving off 38-year lows against the dollar in a matter of days Reuters. The next week, the broader stock market crashed, and analysts traced much of that damage to carry-trade unwinding rather than any single stock market event Reuters. Goldman's own report that September called it a "flight to quality"—traders rushed out of risky bets and into safe ones Goldman Sachs. Similarly, in June 2024, Mexico's peso crashed after an election, and the carry-trade unwind that followed rippled into currency markets as far away as Hungary and Turkey Reuters — showing that when one carry trade blows up, problems spread everywhere.

Carry trades are back in fashion. Reuters reported in May 2026 that these interest-rate bets had made a strong comeback Reuters. But earlier, in December 2025, Reuters had already warned that yen carry trades could become a hidden risk, possibly reigniting inflation and causing "real problems in 2026" Reuters.

What's striking is the flip. Goldman championed these trades in 2024, then spent weeks explaining why they blew up, and now is backing them again. Logically, this isn't wrong. Carry trades are bets on market calm and rate differences—when both conditions hold, they work. The 2024 blowup is a textbook example of what happens when calm evaporates. A political or policy shock can force traders to exit en masse, and once that happens, the unwind spreads beyond just the original currency pair.

For anyone running these trades now, the real risk isn't the interest rates—Goldman's own forecast supports the yen carry trade. The risk is how fast the calm could disappear. In July-August 2024, a currency trading at 38-year lows reversed course in weeks. The quiet we see in markets right now could flip just as fast if a policy shock hits or elections create uncertainty.