Financial markets look to be rebounding after their huge drops in the last couple of weeks. Markets have seen an uptick in value and, and recent news only seems to support that trend. The primary effects of this movement on the foreign exchange market have been twofold: providing the Fed with justification to slow down [...]
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Yen Resurgence is Vicious
The yen crosses are all taking a beating. After more than a year of weakness (mostly through carry trade borrowing) the Japanese yen is cleaning up. Even the US dollar, up against all the other major currencies, is not safe from the yen’s resurgence. The yen is now at its highest level since July 2006. [...]
Markets Recovering but Risk Still the Dominant Factor
Traders and investors in financial markets around the world are preoccupied with paring back their risk exposure. Internationally, emerging market investments are being cut back. In the US equities market, stocks are losing attractiveness in favor of safer Treasury bonds. With regard to the foreign exchange market, traders are shunning the risky carry trade. The [...]
Don’t Be Fooled by the Rebound in Yen Crosses
The carry trade is not back. At all. Stay away for right now. The Dow rallied to close 150 points higher yesterday, and yen crosses followed that stock market rally. The high-yielding currencies, especially, made back a lot of their losses. But the upward movement is likely to be temporary because the current market is [...]
US Dollar Sinking with Credit Market Anticipating Further Shocks
The state of the US economy is not dire, but it certainly does not bode well for the US dollar. Job creation was at its lowest level since February, with the NFP printing at an abysmal 92K. But even worse for the dollar is the fact that job numbers are not the cause of growth [...]
Unraveling of the Carry Trade
We’ve been talking about the carry trade unwind for the past couple of days. The moves in the forex market yesterday and during Asian trading last night ran counter to that assumption. There was a reversal upwards in the yen crosses, especially CADJPY, AUDJPY and NZDJPY. The late rebound in the Dow also buoyed USDJPY, [...]
International Credit Crunch Brings Risk Aversion to Forex Market
A worldwide credit crunch and economic problems (mainly in the United States) have torched the equities markets for the past two weeks. There are fears that the subprime mortgage crisis and the housing problems will escape their respective sectors and infect the market as a whole. The losses are magnified by the uncertainty of many [...]
Risk Aversion and Asian Growth Compete for the Direction of the Forex Market
Global equities markets took a beating last week. The phenomenon began in the United States (on the back of subprime mortgage concerns) and it spread to the financial markets in other countries. For the forex market, the primary impact of the losses was a return of risk-aversion. The risk appetite of currency traders has waned, [...]
Carry Trades Unwind on Risk-Aversion
Yesterday’s report on the extremely sluggish U.S. housing market sent equities markets crashing, investors dumping corporate debt, and currency traders unwinding carry trades. New U.S. homes sales for June fell 6.6 percent. This number has jumped significantly from the 2.2 percent decrease in May. According to a Bloomberg article, this may be a no end [...]
Yen Crosses Start Their Fall
Yen carry trades have dominated the forex market for the past couple of months. With international equities markets booming and high yields to be found in other countries, traders have been borrowing the yen on the cheap to finance their investments. That has brought the yen to multi-decade lows against all the highly traded currencies. [...]
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