The Japanese yen gained quite a bit during the Asian trading session, but simply consolidated for much of the European and US trading session, suggesting the currency may be a bit overbought.
Indeed, volatility was extreme by every measure, as the VIX hit its highest level on record. The predominant issue in the markets right now is the severe lack of confidence in the markets, and that is why the billions of dollars in liquidity injections by the world’s central banks haven’t really made a dent in deteriorating credit conditions. It is clear that investors remain very jittery, leaving traders unlikely to pile back into carry trades like the Japanese yen crosses. My long-term bias for the Japanese yen: bullish. However, if we see some sort of announcement over the weekend saying that governments will guarantee bank lending, the Japanese yen could fall back. Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.