Currencies remain in retreat this morning, led by the NZD and the AUD, which is helping to underpin the USD/JPY despite a slide in JPY crosses. USD/JPY is at 120.72/75 with good offers remaining ahead of 121.00 that are capping gains. US stocks have lost earlier gains, helping to weigh on JPY crosses and tempering USD/JPY gains.
In addition, the VIX is slowly grinding higher, another negative for carry trades as well. Many feel that the USD/JPY will remain in a range getting support from JPY crosses when the USD weakens, as well as support when the USD rallies, as it is now. Many feel that any correction now in global markets will benefit the USD as US investors bring their funds home.
Traders note that the comments also weighing on the EUR/JPY have come from a Reuters report from the Japan trade minister who said that it will take time, but Japanese rates will go to levels that dilutes the carry trade impact.
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