Throughout this past week, we have talked about how we expect the correlation between carry trades and equities to break.
We saw countless examples of this including today when the Dow rallied 92 points and carry trade currencies such as EUR/JPY and GBP/JPY actually weakened. Traders are hesitant to take on risk even though they are buying stocks. Volatility remains high which makes it difficult for carry trades to rally. We expect this trend to continue amidst the lack of market moving numbers out of Japan next week.