The trade pays you a small, steady spread for years and then takes several of those years back in a single week. That shape is the entire risk.
On 5 August 2024 the Nikkei 225 fell 12.4% in one session, its worst day since 1987, and US markets opened sharply lower alongside it. Nothing had gone wrong with American companies overnight. What had changed was the price of borrowing yen — and a lot of dollar assets had been bought with borrowed yen.
— Educational, not financial advice.