Carry traders eye franc and krona as yen’s funding appeal ebbs

Currencies such as the Swedish krona and Swiss franc are emerging as prime candidates to finance carry trades as the yen’s recent surge makes it a less reliable bet than in the past. Russell Investments and Allianz Global Investors favor the franc, citing a widening monetary-policy divergence between Switzerland and Japan, while JPMorgan Chase & Co. strategists recommend the Swedish krona and the Canadian dollar as attractive options. All those are vying to replace the yen in carry trades, in which investors borrow in low-yielding currencies to buy higher-yield assets.

For decades, the yen was traders’ currency of choice to sell but now its appeal is fading as Japan’s bond yields rise and joint U.S.-Japanese intervention to support it underscored a preference for higher Japanese interest rates and a stronger yen.