NEW YORK, Aug 6 (Reuters) -

An epic unwinding of the

yen-funded carry trade

that has reverberated through global markets may have

further to go, analysts said on Tuesday.

Days of havoc in global markets have analysts rushing to

calculate the size of a global carry trade in which investors

have borrowed money from economies with low interest rates, such

as Japan or Switzerland, to fund investments in higher-yielding

assets elsewhere.

The strategy, which kept money flowing into global risk

assets for years, was shaken after the Bank of Japan raised

interest rates last week, forcing some investors to abandon the

trade as the yen surged higher. The resulting unwind sparked

huge losses in global stock markets and saw Japan's Nikkei notch

its worst day since 1987.

"I'd guess the carry trade is only about 50% unwound," wrote

James Malcolm, a UBS Japan macro strategist based in London, in

a Tuesday note to clients.

Malcolm estimates the dollar-yen carry trade grew to at

least $500 billion at its peak. He calculated that some $200

billion of the carry trade has been unwound over the last two to

three weeks.

"How much the carry trade could unwind depends not so

much on the level of the interest rate differential but the

change in the interest rate differential," he said. Comparing

the current move with the carry trade unwind of 1998 suggests

more unwinds could be ahead, he said.

Shaun Osborne of Scotiabank echoed that sentiment,

noting that two gauges of the carry trade - the Bloomberg G10

Carry Index and the Bloomberg GSAM FX Carry Index - had shed

around 5%, only half of what they lost in three notable carry

trade unwinds in the past.

"The adjustment in carry positioning over the past few

weeks has been rapid but it may have further to run," he said in

a Tuesday note.

Hedge funds and other speculative investors, whose

positioning is captured in a weekly report by the Commodity

Futures Trading Commission, have only reduced their short yen

positions by about 50%, Osborne said. The latest report was

released last week.

The report "is a small window on FX positioning but the

data along with the (so far) relatively limited correction in

carry trade index returns suggest that there is more room for

the carry trade to unwind in the short run," he said. "That

would suggest more volatility in risk assets ahead and more

strength in the JPY ahead."