Carry trades have performed extremely well today thanks to the sharp rise in US equities. Whether the rally continues will be dependent upon how much further the Dow can rise.
Although it can be said that risk appetite is back, for many people the rise may still seem too good to be true. For this reason, we could see further gains as the market completely shrugs off stronger Japanese economic data. The market was looking for the Quarterly Tankan report to decline but instead it remained unchanged at 23. Labor cash earnings also rose for the first time in nine months. Unfortunately the BoJ can not do anything about this given the continual drop in consumer prices.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com