Former ECB chief says that the overdue correction in the dollar-yen exchange rate may be beneficial for markets.

• Jean-Claude Trichet, the former head of the European Central Bank, stated on CNBC on Tuesday that a correction in the yen's level against the U.S. dollar was "overdue" and may be "healthy" for markets.
• Trichet maintained that there is no need to "panic" about the U.S. economy and the current data does not justify an emergency Federal Reserve rate cut.

The former head of the European Central Bank stated on Tuesday that the recent rapid strengthening of the market can be viewed as a long-overdue and positive adjustment, and there is no need to worry about the broader market implications.

According to Jean-Claude Trichet, markets were shaken globally on Friday and Monday due to a combination of factors, including a hawkish shift in Japanese monetary policy, geopolitical tensions in the Middle East, and disappointing U.S. jobs data, as reported on CNBC's "Squawk Box Europe."

In my view, the three individuals have played a role in bringing about the overdue correction of the U.S. dollar-yen exchange rate, as the yen was not in its proper position and the carry trade had been very active for an extended period of time, as stated by Trichet, who was previously the governor of France's central bank.

A "correction" refers to a significant decrease in the value of an asset or index by 10% or more, bringing it nearer to a long-term trend.

An investor can profit from a carry trade by borrowing a currency with a low interest rate and investing it in assets that provide a higher return, exploiting the interest rate differential. Recently, many investors have been drawn to yen carry trades due to Japan's low volatility and ultra-loose monetary policy.

Last Wednesday, the Bank of Japan raised its benchmark interest rate and announced plans to taper its bond-buying program, resulting in a rapid appreciation of the yen.

Last week, the U.S. dollar dropped nearly 5% against the yen, and lost more ground on Monday. However, it ticked up 0.5% on Tuesday. Meanwhile, global stock markets fell as "safe haven" assets such as the yen and U.S. Treasurys were strengthened.

Without breaking a few heads, it is impossible to unwind the largest carry trade in history, according to Kit Juckes, chief foreign exchange strategist at Societe Generale, in a Monday note.

CNBC reported on Tuesday that Trichet stated that the correction was a healthy one in some aspects. However, he emphasized the need for caution and prudence, as they have good explanations for the correction observed on Friday and yesterday.

"In the present juncture, it is crucial to avoid panic, as there are still positives in the U.S., Europe, and the global economy that justify this stance."

Trichet stated that there is no need for panic in the United States, as indicated by the U.S. composite purchasing managers' index for July, which remained in growth territory.

Last week, the topic of a U.S. recession resurfaced due to a weaker-than-anticipated July jobs report. However, some economists and Federal Reserve policymakers argued that the data did not suggest a severe economic contraction.

The Fed is expected to cut interest rates by 50 basis points at its next meeting in mid-September, as markets have increased their bets on this outcome to nearly 75%, according to CME Group's FedWatch tool.

There are speculations that the central bank may need to make an emergency cut in interest rates before its scheduled meetings.

While the Fed may be considering a rate increase between 25 and 50 basis points, the current data does not support an emergency cut, according to Trichet.

Based on all the information we have, I believe it is unlikely that the Fed would provide such a level of anxiety, although it may not be entirely unjustified. However, more data will provide a clearer picture in the coming weeks.

While inflation remains above target in the U.S. and euro zone, there has been a sustained period of disinflation, which central banks should be credited for.

He stated that while some market events that were not anticipated can be viewed as a healthy correction, he remains cautious and prudent.

— CNBC's Sam Meredith and Lim Hui Jie contributed to this report