Aside from the weakness of US economic data, carry trade liquidation is the biggest story in the currency market today.
With no Japanese economic numbers due for release this week, the focus is on US equities. The Dow is down 237 points while USD/JPY has fallen close to 300 pips. On a percentage basis, this is the largest move since the subprime crisis hit its peak on August 16. January is supposed to be a strong month for stocks which means a strong month for carry trades. Even though it is only the first trading day of the year, risk aversion is the dominant trend in the market. Unless stocks recover quickly, this should be cause for worry because January is a time to lay on risk, not take it off.