There was a strong intraday reversal in all of the Japanese Yen crosses thanks to the rally in US stocks and the US dollar.
Despite the recovery, we believe that carry trades including USDJPY are vulnerable to more losses. It may not happen tomorrow, but it could very happen next week. The money markets indicate that risk aversion is returning with the spread between central bank and 3 month LIBOR rates climbing back towards the post Bear Stearns’ levels. Meanwhile Japanese economic data has been improving with machinery orders rising more than expected in the month of February.