Carry-trade capitulation
Around mid-August, the deepening credit market disruption escalated into a broad withdrawal from risk. In the currency markets, the carry-trade unwind, which at first appeared to lag the spike in risk aversion, morphed into a full-blown rout. Rapid declines were seen in both G10 and emerging-market high yielders. In Japan, margin calls squeezed out about half of the net long FX positions of retail margin investors.
Since mid-August, central bank liquidity provision has steadied financial markets
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