The JPY has destroyed more forex trading careers than any other currency
The world of forex trading is filled with legends, disasters, and hard-learned lessons—but few symbols strike more fear into traders than the Japanese Yen (JPY), a currency that has earned the infamous nickname: “the devil.”
Origins of the Nickname: A Career Destroyer
The term “devil” was coined years ago by a seasoned interbank trader and respected member of the Global-View trading community. He observed that the JPY had destroyed more trading careers than any other currency, especially during periods of high volatility driven by carry trade unwinds.
One of the most infamous examples occurred in 1998 when Long-Term Capital Management (LTCM), a massively overleveraged hedge fund collapsed. The fallout triggered a violent unwind of carry trades, sending USDJPY plummeting 24% from 147 to 111 in under two months. Only coordinated central bank intervention and a bailout of LTCM stopped further devastation.
Traders who found themselves on the wrong side of this historic move experienced catastrophic losses. This trader was trading during 1998 and his experience during this event likely influenced the JPY nickname “the devil.”
What Is a Carry Trade?
A carry trade involves borrowing in a low-interest-rate currency like the JPY or CHF and investing in a higher-yielding asset or currency to profit from the interest rate differential. These trades often use leverage, amplifying gains but also compounding risk when market direction reverses.
Carry trades are popular but notoriously dangerous when they unwind, as seen in repeated USDJPY meltdowns.
The term funding currency is often used to describe borrowing in a low interest rate currency to invest on a leveraged basis in other assets (e.g. GOLD, stocks, etc.) looking for capital appreciation. While I am not privy to how hedge funds operate, I assume this is a strategy that adds to the volume of carry trade positions.
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2024: History Repeats Itself
Fast-forward to 2024. Traders once again witnessed the JPY “devil” strike again..
USDJPY had soared to a 34-year high at 161.95, driven by persistent JPY selling to fund carry trades. But in just under seven weeks, those trades began to unwind, and USDJPY crashed 13.8% to 139.56.
USDJPY WEEKLY CHART
It’s a pattern seasoned traders know well: carry trades often climb like an escalator but collapse like an elevator. Anyone trying to pick a bottom or fight the trend likely saw their trading account obliterated.
Why Not Call EURUSD the Devil?
Interestingly, EURUSD experienced a 13.7% surge in early 2025, climbing from 1.0178 in January to a peak of 1.1573 by April. This was fueled by a market caught heavily short expecting fallout from Trump tariffs to weigh on the EU economy and the ECB to aggressively cut interest rates. This set the stage for a EURUSD turnaround giving a shift in sentiment on expectations of increased deficit spending in Europe (notably Germany) and unwinding of EUR carry trades, an unintended consequence of Trump’s reciprocal tariffs.
However, while EURUSD saw significant movement, it lacks the intra-day volatility and whipsaw tendencies that characterize USDJPY. Traders rarely fear EURUSD in the same way because it typically does not generate the same kind of sudden, career-ending moves that USDJPY can deliver.
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JPY The Devil vs. EUR The Anti-Dollar
The JPY is infamous for:
• High intra-day volatility
• False breakouts and whipsaws
• Devastating carry trade unwindings
On the other hand, the EUR often plays the role of the anti-dollar, trending steadily in opposition to USD sentiment but without the same violent reversals.
For these reasons, JPY has earned its reputation as the devil, while EURUSD remains more of a strategic currency pair, less feared by seasoned traders.
Could the JPY Lose Its Devil Status?
With the Bank of Japan finally moving away from its zero-interest-rate policy, the future of the JPY as a funding currency is uncertain. If Japan continues raising interest rates and global demand for JPY carry trades declines, the currency could shed some of its devil reputation.
However, as long as traders continue using the JPY to fund risky trades, it remains vulnerable to violent reversals that will likely continue haunting traders for years to come. Only time will tell.
The JPY is called “the devil” in forex circles for good reason. Its history is littered with examples of brutal reversals, blown-up accounts, and hard lessons learned. While other currencies may surprise traders, none strike fear quite like the JPY during a financial crisis and/or carry trade unwind.
Until market behavior changes, the JPY remains one of the most volatile currencies to trade and thus its nickname endures.
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