(Bloomberg) -- The yen has scope to extend its advance as carry trades using the Japanese currency continue to wind down, according to Amundi SA’s chief strategist.

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Bank of Japan’s July rate hike, and the shift in monetary policy it heralded, mark a “game changer” for the currency, said Monica Defend, head of Amundi Investment Institute. “We think the fair value on the yen was and is 140.” The currency was at 142.09 versus the dollar as of 4:22 p.m. in London.

In the trade, investors borrowed at rock-bottom interest rates in the Japanese currency, and invested abroad in assets offering higher returns. Billions of dollars of such trades were unwound after the BOJ’s interest rate hike, adding to a slump in global financial markets.

While the yen will continue to be used as a funding currency for now, “we do believe the carry trade era is over,” Defend said in an interview on the sidelines of the Ambrosetti Forum in Cernobbio, on the shores of Lake Como.

As the BOJ pushes on with its hiking cycle in 2025, “we’ll probably see some repatriation,” she said, as local investors take advantage of rising returns at home.

--With assistance from Flavia Rotondi.

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