This week has seen a lack of US economic data which characteristically gives rise to increased risk appetite inspiring USD and Yen weakness. So, as the market awaits Thursdays US weekly jobless claims and next weeks FOMC decision, we could see further USD selling and an assumption of risk toward Yen selling. Bernanke comments were carefully assembled to maintain some order in the markets. When the market backs of, as it is now, you will often see the weak ccy’s get pushed around and the market move to the illiquid side. This has put carry trade unwinding and risk assumption on hold until the market sentiment becomes clear. Keep an eye on the VIX as it is strongly correlated to risk aversion, at present.

Tags: Carry Trade, Risk Appetite