JPY Soars amid Carry Trade Unwind

by Korman Tam

The underlying theme in the currency market for recent sessions has been heightened risk aversion with sharp swings in the yen pairs. Carry trade unwinding dominated market moves, thereby benefiting the greenback as it rallied against the euro, sterling and Aussie. With global equity bourses remaining under pressure, traders pushed the euro/jpy beneath the 159-level and gbp/jpy below the 226-handle. The dollar's sharp gains were also a result of thin trading conditions with Canada and the US bond market closed in observance of the Veterans Day holiday.

Economic data slated for release this week will shed light on global inflation conditions, including the UK, Eurozone and US. Also to be closely focused on will be retail sales reports from the US and UK. Markets will closely scrutinize the consumption reports for clues of pull-back as a result of steadily increasing energy costs.