Once again carry trades and the Dow moved in opposite directions. For most of the US trading session, carry trades lingered near their highs whereas the Dow Jones Industrial Average weakened with every passing hour.
The correlation between carry trades and US equities continue to break down as buying one no longer means buying the other. Risk aversion is still a problem and traders may simply be recycling money that is parked in local currencies. Meanwhile there is no Japanese economic data due for release until tomorrow night. If the Reserve Bank of Australia raises interest rates tonight, we expect a nice rally in carry trades.