Sell-off in US Stocks Drive Yen Crosses Lower

[DailyFx]

All of the Yen crosses with the exception of USD/JPY came under the weight of US stocks today. This is clearly tied to the liquidation of carry trades because Japanese economic data was tepid.

CGPI growth continued to slow in the month of May, bringing the annualized pace of growth down to 2.2 percent from 2.3 percent. Consumer confidence also deteriorated while bankruptcies increased by 21 percent. Even though Finance Minister Omi said last night that interest rates will have to rise in the long term, the data reflects a country that is not ready for another rate hike. Corporations are clearly hoarding their profits and not sharing it with their employees, which is the primary reason why the country as a whole is facing such weak growth prospects. However if the benefits of a weak Yen was to be reflected in some piece of data, it would have to be in trade. The Japanese Yen weakened significantly in the month of April and we expect this weakness to provide a big boost to the current account surplus.