Today we saw risk re-enter the market with the so called high yielding currencies rallying and the USD/YEN off the extreme lows. This is following the positive Portuguese and Polish bond auctions. The markets had been extremely negative following renewed fears over some of the Eurozone’s more vulnerable members but this bit of news seemed to do the trick even with the fact that German exports printed a slightly cold number indicating that the strong euro is finally taking its toll on one of the strongest Eurozone Economies.
The Yen also retreated from its highs following more jawboning from Japanese officials about their concerns for the Yen and how they are not afraid to take bold actions to stop the appreciation. Unfortunately this kind of talk is not really having any lasting effects on the Yen pairs as the markets got used to this kind of talk coming out of Japan and do not believe intervention is anymore likely today than it was a month ago. We still believe the Yen will move lower in the longer term as there are major fundamental arguments supporting our theories.
