The FX market shows a renewed bias for anti-risk Japanese yen.

A similar yen outperformance early this month, triggered carry unwind and rocked risk assets, including cryptocurrencies.

Some observers fear another round of carry unwind in the near future.

The Japanese yen (JPY) is rallying against the U.S. dollar (USD), outperforming other fiat currencies in a redux of early August market action that was characterized by sharp losses in global stock markets and bitcoin (BTC).

Since late Thursday, the yen has strengthened 2.4% to 145 per dollar, aborting a weakening bounce from the Aug. 5 low of 141.68 in a sign of renewed bias for the “anti-risk” currency. Against the Australian dollar, a barometer of risk appetite, the yen has strengthened over 1%. It’s showing even greater vitality against the euro and British pound.

The activity in the foreign exchange market is reminiscent of the yen’s outperformance at the end of July and early this month that catalyzed the unwinding of carry trades, or bullish risk-on bets, financed by relatively cheap yen-denominated loans as it became more expensive to borrow the Japanese currency.

The resulting lowering of risk exposure in traditional markets also weighed on bitcoin and the wider crypto market. BTC fell from roughly $70,000 to $50,000 in the eight days to Aug. 5 before recovering to $60,000 alongside a bounce in the USD/JPY.

“Yen strength is causing a negative feedback loop as stops get triggered and overstretched carry positions get unwound. This is rattling positioning in global risk assets,” famous trader Simon Ree said on X at the time.

In his latest commentary, Andrei Kazantsev, the head of Goldman Sachs’ crypto-linked trading desk, echoed Ree’s comments, explaining how bitcoin and ether were caught in the yen carry trade unwind and the global VAR shock of Aug. 5. VAR, or value at risk, is the maximum amount of loss a market can sustain over a period of time. A sudden jump forces traders to scale back exposure to relatively risky assets.

Thus, the renewed yen strength warrants attention from crypto traders. According to ING, the yen’s rally to 141.68 per dollar from 161 in the three weeks to Aug. 5 has set the tone for yen buying on dips.

“A 20-big figure drop in USD/JPY we believe will have a meaningful impact on expectations for future direction and therefore potentially on behavior,’ ING said in a note to clients on Aug. 16. “Behavioral changes likely mean a greater willingness to buy yen at weaker levels, skewing the risk to a strengthening bias.”

Some observers, however, say that the carry trade unwind could resume in the coming weeks spurred by the U.S. economy and the next interest-rate decision meeting of the Federal Open Market Committee (FOMC), scheduled for mid-September.

“The FFFs [Fed funds futures] currently predict a 50% chance of a 50-bps hike in September; however, we expect these odds to decrease as we approach the FOMC meeting due to generally acceptable economic data. Should the Fed cut by 50 bps, however, we think the market’s reaction will be positive initially, but a sell-off could ensue as concerns about the economy and strength in the Yen will revive the carry trade unwinds,” Arnim Holzer, global macro strategist at Easterly EAB Risk Solutions, said in an email.