Newsletter · · Ashutosh Agarwal

The Yen Breaks 155 and the Carry Trade Unwind Begins - G10 FX Weekly - Week of September 10, 2026

G10 FX Weekly for the week of September 10, 2026. Podcast synthesis on the week dollar yen finally broke through 155 and kept falling, why Tokyo wants a calm yen rather than a strong one, the risk that this becomes a repeat of the August 2024 carry unwind, and the oil war, German election shock and fresh US Canada trade fight now feeding the move.

G10 FX Weekly

Week of September 10, 2026: The Yen Breaks 155 and the Carry Trade Unwind Begins

Monday's newsletter called 155 the trapdoor: the one level in all of currency markets where the great yen "carry trade" could tip over. We wrote that the dollar had dipped to about 155.30 against the yen and bounced.

It didn't hold. On Monday the 7th, the dollar fell clean through 155, and this time it kept going. By midweek it was trading around 154, and the yen had become the strongest of the world's major currencies. The thing everyone was watching for actually happened, so this issue is about what breaking that line has set in motion, and the three other stories now feeding it: an oil war that won't quit, a German election that just handed a far-right party 44% of the vote, and a fresh trade war between the United States and Canada.

A quick reminder of the plumbing, because it's the whole game. A carry trade means borrowing a currency that pays almost no interest, for years, the Japanese yen, and using the cash to buy something that pays more. It works beautifully until the borrowed currency suddenly jumps in value. Then everyone who borrowed yen has to rush out and buy it back to repay their loans at once, which shoves the yen up even faster. That stampede is what 155 was supposed to trigger. We may now be watching the opening act.

TL;DR

  • The 155 line broke, and it's the "real deal." Saxo's John Hardy says the yen's surge is now in "its fifth day… the most persistent move in ages," and a break of 155 opens the door toward the year's low near 152, with a cascade risk all the way to 142–146 (Saxo Market Call, Sep 8). The dollar hit roughly 154.05, and the yen is up almost 4% this month, the best-performing major currency (Bloomberg Daybreak, Sep 8).
  • Tokyo doesn't want a moonshot, it wants calm around 150. Hardy's read is that Japan's officials aren't trying to force a dramatic move; they'd be happy to "stabilize things… either side of 150" (Saxo, Sep 8).
  • A pro is now openly bracing for a re-run of August 2024. RiskReversal's Guy Adami: "there's a volatility event coming… probably predicated on some yen bond-type move," and he "wouldn't be surprised to see a repeat" of the crash "two years ago, August" (RiskReversal Pod, Sep 9).
  • The oil war got worse, not better. Iran struck a US warship and eight oil tankers; the US destroyed five Iranian carriers in four days; Brent crude pushed above $101 (NAB Morning Call, Sep 9). That is the fuel under every rate-hike story below.
  • The European Central Bank is expected to hike again today (Thursday), its second in this surprise oil-driven tightening cycle (Squawk Box Europe, Sep 9).
  • Germany just flashed a big political warning light. The far-right AfD took 44% in the Saxony-Anhalt state election, a euro risk to watch, with two more state votes on September 20 (NAB Morning Call, Sep 7).
  • Britain's problem isn't a secret rate plan, it's oil and debt. Bank of England Governor Andrew Bailey told MPs there is "no secret plan" to hike, but warned markets are demanding a higher premium from heavily indebted governments because of the oil shock (Squawk Box Europe, Sep 9).
  • A new trade war opened, and it muddies the "borrow the Canadian dollar" idea. Canada slapped retaliatory tariffs of 15–50% on about $20 billion of US goods, but a surge in Canadian oil is cushioning the blow (Prof G Markets, Sep 9).

What's new

1. The trapdoor opened: 155 broke, and it looks real

Last week the whole newsletter hung on one number. This week it broke.

On Saxo Market Call (Sep 7), Saxo's John Hardy narrated it in real time. The trigger was Friday's US jobs report, and, oddly, the fact that it was good. American employers added 162,000 jobs against just 55,000 expected, one of the better beats in a while, and unemployment held at 4.1%. Normally strong jobs data lifts the dollar. But this time it did not send US government-bond yields spiking, and without that push the dollar had nothing to stand on. As Hardy put it, "it feels more comfortable to be looking for higher yen levels. Now that we're breaking down below this key 155 area…"

By the next day the picture was even clearer. On Saxo Market Call (Sep 8), Hardy made the call plainly:

It's in its fifth day… in time terms for something anywhere resembling this size. This is the most persistent move in ages. So it really does appear to be the real deal.

He sees the next stop as the year's low around 152, and, echoing last week's J.P. Morgan estimate, a break lower could still cascade toward 142–146 as trapped carry traders scramble out. On Bloomberg Daybreak (Sep 8), BNY's Jeff Yu put a number on how far it's come: the break of 155 "triggered stop-loss orders," the dollar fell to about 154.05, and the yen is now "up almost 4% this month, making it the best performer among group of 10 currencies."

Why it matters: this is no longer a level being tested. It is a level that gave way, with momentum behind it. And because the yen funds so many other bets around the world, a yen that keeps climbing forces selling of everything the borrowed money bought.

2. Tokyo's real goal isn't a strong yen, it's a calm one

Here's the subtle part most headlines miss. Japan's officials do not actually want the yen to rocket higher. A too-strong yen hurts Japanese exporters and the economy. What they want is to stop the one-way slide that invites speculators to keep betting against them.

On Saxo Market Call (Sep 8), Hardy framed the aim precisely:

It's not necessarily to engineer a massive resetting of the currency… if they could just stabilize the [dollar-yen] exchange rate at current levels, they'd be happy with that. But I think they know to get that stability they probably need to… see it a bit lower still, 150.

In other words, a new home "either side of 150" would suit Tokyo fine: strong enough to scare off the carry crowd, not so strong it wrecks the economy. Whether they can pull off that soft landing, Hardy admits, is unknown, "Can they get that soft landing? I don't know." On Bloomberg Daybreak (Sep 8), BNY's Jeff Yu made the same point from the other direction: 160 is now the level where "some deterrence has been established," and if the Bank of Japan surprises with something more aggressive than expected, "you don't want to test that."

There's a quiet confirmation buried in the bond market, too. Hardy noted that Japan's longer-term government bonds have been rallying even as yields rise elsewhere, the gap between 10-year German and Japanese yields has widened from about 12 to 50 basis points since early summer. (A basis point is one-hundredth of a percentage point.) That is a sign investors are putting trust back into Japan, not fleeing it, exactly what you'd expect if they believe the central bank is finally getting a grip.

3. A pro says the quiet part out loud: this could be August 2024 again

If you want to know what keeps risk managers up at night, listen to the traders themselves. On RiskReversal Pod (Sep 9), veteran trader Guy Adami said it directly:

I do think… there's a volatility event coming. I think it's probably predicated on some yen bond-type move. And I wouldn't be surprised to see a repeat to a certain extent of what we saw two years ago, August.

That reference matters. In August 2024, a surprise Bank of Japan hike set off exactly the carry-trade stampede described up top, and it dragged down stocks worldwide before markets steadied. Adami is warning the ingredients are lining up again: the yen is moving, government-bond yields are climbing "for the wrong reasons," and an economy leaning hard on expensive AI investment doesn't like higher borrowing costs. On the show, the US 10-year yield was quoted at 4.84% and the fear gauge (the VIX) had crept to the week's highs around 16.5, not panic, but a market starting to pay attention.

4. The oil war is the engine under everything

None of the above happens in a vacuum. The reason central banks everywhere are turning hawkish is that the US-Iran conflict keeps pushing oil higher, and higher oil means higher inflation.

This week it escalated again. On NAB Morning Call (Sep 9), NAB's Sally Auld ran through it: Iran attacked a US warship, the US destroyed five Iranian tankers in response, Iran fired missiles at a Jordanian air base the US uses, and a senior Iranian official said the country is "ready for a more intense war." Brent crude jumped 3.3% to above $101 a barrel. As Auld put it, the market has "shifted into that higher trading range for oil… we have made zero progress in resolving this situation."

There was a second, more technical drama in bonds that's worth understanding, because it's a warning about the limits of government firepower. The US Treasury has been buying back its own longer-dated bonds to hold yields down. This week it announced a $6 billion buyback, but investors had been led to expect the program would be far bigger, so the smaller-than-hoped number backfired: instead of falling, the 10-year yield jumped toward 4.85%, and a fresh 10-year bond auction cleared at 4.834%, the highest since 2007 (NAB, Sep 9).

On RiskReversal Pod (Sep 9), the hosts quoted a sharp line from investor Stan Druckenmiller (relayed via analyst Peter Boockvar) that captures the trap:

Once markets believe treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the test.

That is the same lesson Japan keeps learning about defending the yen, and now it's being tested on US government bonds too.

5. Europe hikes again today, into a German political storm

The European Central Bank is expected to raise rates again today (Thursday), its second hike in a cycle almost nobody predicted a few months ago, driven by that same oil-fed inflation (Squawk Box Europe, Sep 9). That is the quiet bull case for the euro we've flagged before: if Europe is tightening while the US hesitates, money tends to flow toward the higher, rising yield.

But a fresh political risk landed this week. On NAB Morning Call (Sep 7), NAB's Ray Attrill reported that the far-right AfD party won 44% of the vote in Germany's Saxony-Anhalt state election, three seats short of an outright majority, while German industrial production for July came in much weaker than expected, down 1.1%. Two more state elections follow on September 20 (in one, Mecklenburg, the AfD is polling near 40%). None of this changes German policy tomorrow, the next federal election isn't until 2029, but as Attrill put it, "these are warning signs," and "the reverberations go across Germany and Europe," with investors already glancing toward France's own political drama next spring. For the euro, it's a slow-burn risk rather than a fire, but it's now firmly back on the radar.

6. Britain: not a secret plan, just the same oil-and-debt bind

Sterling's story this week was less about the Bank of England doing something and more about it explaining what it can't control. On Squawk Box Europe (Sep 9), Governor Andrew Bailey, speaking to Parliament's Treasury Committee, knocked down talk that the Bank was quietly planning to raise rates, insisting there was "no secret plan." His real message was about why UK borrowing costs are stuck high, and it applies to every indebted government right now:

The market is looking at the oil price… if the oil price is leading to higher food costs and higher energy costs… we're worried that this is going to get a little bit out of hand… As such, the market is demanding quite naturally a higher premium from those high deficit nations with high debt to GDP.

In plain terms: investors will lend to big-spending governments, but with oil driving inflation fears, they want to be paid more to do it, and Britain, with its large debts and an October budget looming, sits squarely in the crosshairs. Bailey's blunt bottom line: "Until this oil price escalation eases, it's very difficult for anyone to… think about lower yields."

7. A new trade war complicates the "borrow the Canadian dollar" trade

Last week, one desk floated the Canadian dollar as a candidate to become a new funding currency if the yen got too dangerous to borrow. This week, Canada landed back in the headlines for a very different reason.

On Prof G Markets (Sep 9), Canadian economist Mike Moffatt walked through a sudden escalation: after trade talks collapsed in late August, Canada hit back at US tariffs with its own levies of 15% to 50% on roughly $20 billion of American goods, doubling duties on US steel, aluminum and iron to 50%, and targeting furniture, clothing, appliances and dairy. Prime Minister Mark Carney pledged to match Washington "dollar for dollar, rate for rate."

The twist relevant to currency traders: this hurts Canada less than you'd think right now. Moffatt estimates the tariffs might shave 0.3–0.4% off Canadian growth over a year, real, but modest, and crucially, "one of Canada's biggest exports is oil, and the price of Western Canadian Select has gone from about $50 a barrel prior to the actions in Iran to $80 a barrel." So the same oil war roiling everything else is quietly padding Canada's wallet. The read-across: the Canadian dollar is not a clean, sleepy funding currency at the moment, it's an oil-linked currency getting a lift from the Iran crisis, wrapped in fresh trade-war headline risk. Anyone eyeing it as the "next yen to borrow" should note it now cuts both ways.

The debate

Fight 1: Is the yen move the start of something big, or nearly done?

The nervous side, voiced by Guy Adami on RiskReversal Pod (Sep 9), sees a volatility event brewing and an echo of the August 2024 crash: once the carry trade starts unwinding, it can feed on itself.

The calmer side comes, interestingly, from the same person leading the bullish yen call. John Hardy on Saxo Market Call (Sep 8) thinks that in pure momentum terms "we've seen a decent chunk of the move for now… maybe the bulk of it," even if the price "deserves a bigger reset" over time. And Tokyo, as he notes, is actively trying to cap the drama around 150, not amplify it. So the honest picture is two-sided: a real risk of a disorderly squeeze, against a base case of a controlled grind toward 150–152 that Japan would happily live with.

Fight 2: Can governments actually control their bond markets?

This week handed us a clean, live test. The US Treasury tried to hold its bond yields down with a buyback, and the market pushed yields up anyway, partly because the program was smaller than hoped (NAB, Sep 9). The Druckenmiller warning quoted on RiskReversal (Sep 9), that defending a price only invites bigger and bigger tests, is the bearish case that no official body, from the Bank of Japan to the US Treasury, can hold a line forever against a determined market. The bullish counter is simpler: yields this high are starting to attract real buyers on their own. NAB's Sally Auld noted a 10-year real yield above 2% is "starting to look pretty attractive" to long-term investors, and that week's bond auction drew "pretty strong demand."

Trades in play

Drawn from what the desks actually said, ranked by usefulness for a book:

  • Long yen remains the marquee trade, but the easy money may be made. Saxo's Hardy is still constructive, targeting 152, then potentially 142–146, but flags that the fastest part of the move may be behind us and that Tokyo wants to anchor things near 150. The cleaner expression, in his view, is short euro/yen: it strips out the dollar's own swings, it just broke to a new 2026 low under 180, and his next targets are 175 (the 2024 carry-unwind high) and 170.
  • Long euro against the dollar, on the logic that the European Central Bank keeps hiking into the oil shock while the Fed hesitates, but now with German (and looming French) political risk as the offset to watch.
  • Respect the tail risk. Guy Adami's warning of a possible August-2024-style volatility event is not a trade so much as a reason to keep hedges on and position sizes honest if you run carry.
  • Handle the Canadian dollar with care. It is being pulled two ways, up by an oil windfall, down by a new trade war, so it is not the placid funding currency last week's discussion imagined.

Read-throughs

  • Euro/yen and euro/franc. Euro/yen broke below 180 to a fresh 2026 low, with Saxo eyeing 175 then 170, historically the cleaner way to play a yen rally. On the franc, there was no fresh Swiss National Bank commentary this week; the euro/franc rate remains near its recent lows around 0.94, and the only notable Swiss corporate news was idiosyncratic, Novartis fell about 9%, its worst day in six years, after a third clinical-trial setback in a week (Bloomberg Daybreak, Sep 8), a company story, not a currency one.
  • Bonds moved together, and up. The 10-year US Treasury yield hit 4.83% (its auction the highest since 2007), with French and Italian yields up 11 basis points, UK gilts up 9, and German bunds up 8 in a single session (NAB, Sep 9). European stocks felt it, the Euro Stoxx 50 fell 1.6% and Germany's DAX 1.7%.
  • Commodities are shouting. Beyond oil, copper hit a record on the London Metal Exchange above $14,500 a tonne, up 47% over the past year, on AI-driven demand and traders front-running possible US copper tariffs (NAB, Sep 7). The Australian and New Zealand dollars, both tied to metals, pushed to 13-year highs.
  • The August-2024 template. If the yen keeps climbing and a volatility event does arrive, the assets most exposed are the ones the borrowed yen bought, global stocks (especially the AI-heavy Nasdaq), emerging-market currencies, and yen-funded carry baskets. That is the scenario a break of 155 has now put back on the table.

What changed

Two things flipped this week. First, 155 stopped being a warning and became a fact: the dollar broke below it against the yen and, for the first time in this saga, kept falling, five straight days that Saxo now calls "the real deal." Second, the oil war got worse rather than better, cementing a world where central banks are hiking, government bonds are selling off together, and even the mighty US Treasury just got overruled by the market on its own bonds.

The through-line is unchanged from Monday and only stronger: an oil shock is turning the whole G10 hawkish at once, and the most fragile pressure point in that new world is a yen that has now slipped its leash. The debate is no longer whether 155 breaks, it did, but whether Japan can guide the move gently toward 150, or whether the carry unwind takes the wheel. Watch Friday's US inflation report and the ECB's decision today for the next shove.