Carry trade was front and center for the New York session. The blood letting began in Europe and New York did not want to put out the fire. In fact New York traders maniacally add fuel to the conflagration. We saw GBPJPY lose 5.5 yen at the start of New York to trade from the 235.50 area down to the 231.00/10 area. AUDJPY lost nearly 2 full yen on a move from 102.65 down to 100.65.NZDJPY took a fall from the 86.15/20 area down to the 84.40/45 level. EURJPY didn't want to feel left out as it traded from the 163.85 area down to the 162.15/20 area. The high yielding currencies (AUD, NZD) were clearly the biggest losers in the risk aversion/carry trade sell off. The main catalyst for the sell off was the big losses incurred by the U.S. equity market. The Dow plunged over 220 points on the day and this move dragged the JPY crosses lower. Further speculation of larger write downs in the financial sector provided momentum to the downside for carry trades. We will need to keep our ears and eyes open for more signs of bad news from the financial sector for further direction of the carry trade.
Next week's data calendar shows we are loaded up. We will be getting major readings on housing and inflation data out of both the UK and US. We will also be getting an interest rate decision out of Japan. Scour our data calendar and make notes of all important releases. There releases could whip the markets up and keep the volatility at elevated levels. Volatile markets provide for many trading opportunities. So be alert next week as we could be in for another bumpy ride.
Upcoming Economic Data Releases
- 11/11 23:50 GMT Japanese Domestic CGPI (YoY) for October; expect +2.3% vs. prior +1.7% (relevance: high)
- 11/11 23:50 GMT Japanese Current Account Total for September; expect JPY2689.2b vs. prior JPY2081.0b; (relevance: medium)
