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US Dow Jones Gains Most Since 1933, Australian Dollar Surges Against Japanese Yen
Monday, 13 October 2008 20:19:39 GMT  |  David Rodriguez, Quantitative Analyst
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The US Dow Jones Industrials Average posted its best single-day performance since 1933, and the clear boost in risk sentiment sent the Australian dollar a full 9.5 percent higher against the Japanese Yen. Markets ostensibly lauded the introduction of G7 measures to shore up credit markets, but the rally likewise seemed to be a clear correction of eight consecutive days of Dow declines. 

 

Dow_2008-10-13

Whatever the justification, the sharp comeback in global stock markets had a pronounced effect on the forex carry trade—making the high-yielding Australian and New Zealand dollars the best performers across the G10 universe just ahead of the New York close. The safe-haven Japanese Yen and recently resurgent US dollar fell victim to the clear improvement, and the forex carry trade saw substantial improvement for the first time in a very long time.

Yen_2008-10-13

Subsequent outlook for the Dow Jones Industrials Average, the Australian Dollar, and the Japanese Yen will subsequently depend on developments in global risk sentiment. If we see continued improvement in financial market conditions, the Australian dollar and stock markets may very well go on a strong winning streak. Yet such an outlook may seem short-lived if we are to see renewed selling as part of a longer-term downtrend in the Dow and other key risky asset classes.

Written by David Rodríguez, Quantitative Analyst for DailyFX.com

To contact the author of this report, e-mail  drodriguez@dailyfx.com

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