The Japanese yen jumped more than 2 percent against high-yielders like the Australian dollar and New Zealand dollar on Tuesday, but simply treaded water versus the US dollar, British pound, and euro.
Nevertheless, risk aversion remains a big threat, especially as Wednesday marks the expiration date of the SEC's ban on short-selling of financial stocks will expire. With bearish investors finally able to sell shares once again, this could spur further weakness in the stock markets and the Japanese yen crosses, translating into additional strength for the low-yielder. With the credit crisis still hitting the world’s financial markets quite hard, true financial stability is not likely to come soon. This leaves traders highly unlikely to pile back into the carry trade. My long-term fundamental bias for the Japanese yen: bullish. Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.