The Japanese yen was generally weak across the majors as the stock markets held up well.
In fact, the DJIA was down over 200 points by 11:00 EDT, but recouped most of its losses throughout the day to end down 19.59 points. News that Warren Buffet had bought $3 billion in preferred GE stocks helped to boot investor confidence, but the factor traders are really waiting on is the passage of the Treasury’s $700 billion bailout bill. The bill has been changed slightly to include an increase in FDIC insurance limits to $250,000 from $100,000 and a two-year extension of tax breaks in order to win support from Republicans, and as a result, it is expected to pass in the US Senate tonight. Such a result would add to speculation that it will pass in the House of Representatives – who voted it down on Monday – when they reconvene on the matter on Friday, and thus, could send risky assets surging. In the near-term, I think we’ll see the Japanese yen weaken if this bill is approved by the Senate. However, 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. Related Article: How to Trade and Survive in Highly Volatile Markets Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.