Japanese Yen: Watch Out for Follow through in Asia

The Japanese Yen continued to weaken significantly on the weight of carry trade liquidation. Yesterday we warned that a 100 point move lower in the Dow would have a broad sweeping impact on these interest rate plays.

Today, even though the Dow is not down 100 points, it did move 180 points intraday. If the exodus out of stocks continues in Asia, then the sell-off that we have seen in the Yen crosses today could continue. The only piece of data released last night was the trade balance. A disappointment in the trade surplus was offset by a jump in the seasonal balance in the month of April. Tomorrow we have consumer prices due for release. The rise in the CGPI index suggests that we could see stronger inflation growth, which would help to exacerbate the moves lower in the yen crosses.