It is no secret that Carry Trades are moving in lockstep with the Dow which leads us to wonder whether the last hour selloff in the US stock market suggests that carry trades could resume their losses. We believe this may the case especially since the VIX has turned higher once again.
The financial markets are becoming extremely volatile which makes it difficult for carry trades to do well. The Yen came under pressure last night after Mizhuo announced a 17 percent drop in net income, largely due to subprime related losses. There was no other Japanese data released last night and the tertiary activity index is the only piece of data worth watching tonight which means that the moves in the Nikkei will determine whether or not we see follow through selling in the Yen crosses (read our Special report for more on Will Carry Trades Resume their Losses).