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 favors funding carry positions using the Japanese yen, Swiss franc, or euro over the coming months, attributing the strategy's appeal to low volatility across G10 currency pairs.

A carry trade works like this: you borrow money in a currency with a low interest rate and lend it in one with a higher rate, keeping the interest rate difference as profit. The Japanese yen is a classic funding currency because Japan's interest rates are among the lowest globally. The trade only works if the cheap currency doesn't suddenly strengthen against the one you invested in—a move that would wipe out your rate gains. Volatility, in this context, measures how much currency prices swing around. Low volatility means predictable moves, letting the interest-rate profit accrue steadily. High volatility can turn a months-long profit into a loss in days.

Goldman's framing that current conditions are "the best since 2000" is a statement about the volatility 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 funding currency keeps weakening, the trade profits on both the interest-rate differential and the currency movement itself.

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

That 2024 unwind unfolded quickly. Reuters reported on July 29, 2024 that a mix of political, policy, and technical risks sent the yen surging off 38-year lows against the dollar, upending global FX carry positioning 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. 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 travel across unrelated currency blocs once broader deleveraging sets in, not just within the original pair.

The trade's reemergence fits a broader pattern. Reuters' May 2026 reporting described rate-based G10 carry trades 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 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.

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

For traders 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. The question is how quickly a volatility regime shift could force the same rapid unwind seen in July-August 2024, when a currency near 38-year lows reversed within weeks. The underlying tension between low realized volatility and latent political or policy risk hasn't disappeared. It's simply being priced differently in July 2026 than it was two years ago.