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A dramatic rebound in the yen has sent shockwaves across global markets and left the currency on course for its best month this year, setting the scene for further volatility around Japanese and US central bank meetings this week.

The yen has leapt 4.7 per cent against the dollar in July, helped by the possibility that the Bank of Japan could raise interest rates on Wednesday, narrowing the yawning gap with Federal Reserve borrowing costs that had driven the currency to a string of multi-decade lows. Expectations of Fed cuts have also ramped up following a fall in US inflation earlier this month.

The currency’s recovery has been turbocharged by the unwind of popular “carry trades”, where investors borrowed in yen to fund the purchase of higher yielding currencies and had pushed bets against the yen to their most extreme levels for around two decades. 

Analysts say that as investors have rushed to cut their losses on misfiring carry trades, they have been forced to sell assets in other corners of markets, adding fuel to a sharp sell-off in global tech stocks.

“The FX market is moving everything right now, because yen-funded carry trades have been one of the most popular trades this year — cutting the positions is affecting other risk positions as well,” said Athanasios Vamvakidis, global head of foreign exchange at Bank of America. 

While the yen stabilised on Friday, forex traders say volatility will intensify next week as markets prepare for a knife-edge interest rate decision by the Bank of Japan and adjust to a global shift in risk appetite and the massive unwinding of speculative currency positions. 

The predictions, made by traders in Tokyo at three investment banks, came at the end of a week in which the yen surged from ¥157.5 against the dollar to ¥153.71.

But traders also warned that a BoJ decision on Wednesday to leave interest rates untouched could trigger a rapid reversal for the yen, sending it back on course towards the ¥161 per dollar low at which the Japanese authorities are suspected of having intervened in mid-July.

“Things really could get interesting next week for the yen, because the set-up going into the BOJ meeting is very different given that market sentiment towards the carry trade has clearly changed,” said Benjamin Shatil, FX strategist at JPMorgan in Tokyo.

“There are still a lot of short yen positions out there, which could be unwound if we get a move through 152. At the same time, if the BOJ refrains from making any substantial announcement, there might be very little resistance to the yen falling back,” he added.

Traders in swaps markets are evenly split on the prospect of the Bank of Japan lifting its key rate 0.15 percentage points to 0.25 per cent next week, up from a probability of a quarter earlier this month. 

Looming over this has been the influence from the US political scene, including comments by Donald Trump that the US had a “big currency problem” because of the weakness of yen and yuan, signalling he might explore different options for weakening the dollar if he wins the presidential election in November. 

That has played alongside the heavy sell-off on Wall Street led by tech shares.  

“The most crowded fund manager trade had been long tech stocks and in FX it’s been short yen . . . this week has seen the most crowded trades unwind and I’m sure there was some cross over between the two,” said Chris Turner, global head of research at ING.

BoJ-watchers believe that the currency moves have placed the central bank in a difficult position, as the current economic situation appears to justify a small rate increase. If the BoJ decides not to move, said analysts, the market may decide that it has held back because the yen is now stronger, allowing the market to interpret the decision as purely reactive.

“Over the last two years people have made a lot of money shorting yen . . . there will be a bias to jump back in if the BoJ doesn’t lift rates,” said Turner.

Additional reporting by Kate Duguid in New York

NPR is in Paris for the 2024 Summer Olympics. For more of our coverage from the games head to our latest updates.

PARIS — Divers Sarah Bacon and Kassidy Cook have won the United States’ first medal of the Paris Olympics.

Bacon and Cook took home the silver in the 3-meter synchronized springboard competition, held at the Aquatics Center in Saint-Denis, north of Paris. This is the first time the U.S. has medaled in the event since 2012.

Chinese competitors Chang Yani and Chen Yiwen took the gold, followed by Bacon and Cook of the U.S. Scarlett Mew Jensen and Yasmin Harper of Great Britain won the bronze medal.

This is the first medal for both Bacon and Cook. Bacon is making her Olympic debut. Meanwhile, Cook competed in the 2016 Summer Olympics in Rio de Janeiro, where she came in 13th in the women’s 3-meter springboard.

It’s the first medal of what’s expected to be another record haul of medals for Team USA at a Summer Olympics.

Kassidy Cook and Sarah Bacon of the U.S. compete in the women’s synchronized 3-meter springboard diving final at the Paris 2024 Olympic Games at the Aquatics Centre in Saint-Denis, north of Paris, on Saturday. They won silver, the first U.S. medal in the event since 2012.

Sebastien Bozon/AFP via Getty Images

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Sebastien Bozon/AFP via Getty Images

The Paris Olympics kicked off with an extravagant opening ceremony on Friday night when an armada of boats carried 10,500 athletes along the Seine — the first outdoor version of the spectacle that was expected to be watched by a billion people.

Earlier, a shadow was cast over the event by an act of criminal sabotage that hit France’s high-speed rail network in the early hours of the morning causing nationwide transport chaos. Heavy rain then began to fall about 30 minutes into the three-hour show, a nightmare scenario for the planners of the theatrical performance that featured a massive cast of dancers, two orchestras and a clutch of pop stars, including Lady Gaga doing a cabaret-tinged song.

Before the ceremony, interior minister Gérald Darmanin said: “We are ready for this magnificent event,” adding that no specific threats had been detected. The railway sabotage would “not have direct consequence on the Olympics or the ceremony”. 

By mid-afternoon long queues had formed for ticket holders to get into the highly secured perimeter along the Seine river where 320,000 spectators were expected along the medieval-era cobblestone quays. The format of the event required heavy security: 45,000 police were deployed on the ground and in the air, using helicopters, drones and snipers positioned on roofs. 

The weather also tested the dozens of experienced ship captains powering the parade, who navigated at precisely the right speed to keep the show on line. Some spectators fled the quays for cover as rain poured down.

President Emmanuel Macron hosted more than 100 heads of state at Trocadero plaza across the river from the Eiffel tower where the athletes disembarked for a final parade and a performance by francophone favourite Céline Dion. Jill Biden, wife of the US president, and other leaders attended a reception at the Elysée palace beforehand. 

The idea for such an ambitious opening was the brainchild of one man, Thierry Reboul, an event specialist known for punchy marketing stunts, but pulling it off it needed more than 15,000 performers, technicians and firework specialists.

The performance featured ballet dancers on the roof of the Louvre, while hundreds of modern dancers and breakdancers performed along the quays and on some of the boats. Performers were clad in handmade outfits stitched by French couturiers, and LVMH’s Louis Vuitton trunk suitcases were prominently displayed in a lengthy segment. Bernard Arnault’s LVMH was an Olympics sponsor.

Organisers had to scale back some elements, such as BMX riders set to do tricks on a ramp because rain made it too slippery.

When Reboul pitched the idea for the river ceremony to Tony Estanguet, head of the Paris organising committee, the two-time gold medal winner reacted with stupor that quickly became enthusiasm. “It will be ambitious, audacious and totally crazy,” said Estanguet, recalling the moment. 

Reboul said the idea came to him on a walk along the Seine, the snaking river whose banks were chosen by a Gallic tribe called the Parisii to found a settlement about two thousand years ago. He told himself: “It should be here, of course it should be here, and nowhere else.”

The organisers hired Thomas Jolly, a 42-year-old theatre director known for a musical called Starmania, who started imagining how to convey the spirit of France from literature and culture to history. “I’m used to designing performances on a stage, and this time the entire city was my canvas,” he told reporters earlier this week. 

Jolly hired a team he has long worked with — a musical director, choreographer and a costume designer, all renowned in their fields — and also included author Leila Slimani, scriptwriter Fanny Herrero, who created the show Call My Agent!, and others to help him write the 12 tableaux that make up the ceremony.

Before they started writing, they took long walks along the Seine for inspiration and researched the history of its bridges, such as the oldest, Pont Neuf, finished under King Henry IV in 1607, and the Pont d’Austerlitz, commissioned by Napoleon Bonaparte, from which the parade will begin.

“We drew on the past of each site and monuments: almost each stone tells something about our history of France, of the history of Paris, a history which is connected to the world,” he said. 

But Jolly and Estanguet did not want the theatrics to overshadow the athletes, instead putting them at the centre of it by giving them the best spots to view the show — the decks of the boats on the river. 

“The athletes are the heroes of the show,” said Estanguet.

Although officials remained vague about the price, French media reported that the ceremony cost about €120mn, roughly four times that of the opener of the London 2012 Games. The overall cost for the Paris Games, which was pitched as a greener edition because little new infrastructure was built, is expected to reach €9-10bn, according to the national auditor. About one-third of that will be paid for by sponsors.

Jolly’s show was filled with memorable, kitschy moments: a hooded figure leaping across the zinc roofs of Paris, drag queens dancing to electro, beheaded royals of the French revolution set against heavy metal music, and a silver horse with an armour-clad rider gliding down the Seine.

Cheers rose when France’s beloved footballer Zinedine Zidane passed the torch to tennis champion Rafel Nadal.

The spectacle climaxed with an elaborate light show beaming out from the Tour Eiffel before a final flame relay to the Louvre led to a hot air balloon ascending into the night sky bearing a fiery Olympic cauldron.

Framed by the Eiffel tower, Canadian singer Céline Dion, in her first performance in years because of illness and wearing a white, beaded dress featuring 500m of fringe custom made by Dior, belted out Edith Piaf’s Hymne à l’amour.

“I declare the Paris games open,” said Macron.

Additional reporting by Adrienne Klasa