Even though the Japanese Yen strengthened against the US dollar and British pound, the carry trade is still alive and kicking. USD/JPY has not always been the market?s preferred carry trade currency and we are seeing that same dynamic now.
AUD/JPY and NZD/JPY, the poster child of carry trades continue to rise and that alone is telling us that we are only seeing carry trade profit taking in USD/JPY and not full-fledged liquidation. The much awaited Japanese Tankan survey proved to be a non-event as the data came out right in line with expectations. However labor cash earnings fell 0.6 percent in the month of May, which was a sharp disappointment considering the market was looking for earnings to rise by 0.2 percent. This will keep the BoJ on hold since weak earnings translate into weak spending.