This means that when the dollar weakens, it weakens against every currency including the Japanese Yen. This suggests that the market is no longer obsessed with carry trades. In fact, yesterday when the Dow rallied, carry trades did not follow suit and today, they continued lower. In the grand scheme of things, the Japanese Yen crosses are still in corrective mode after the carry collapsed back in mid July. The outlook for the US economy is unclear which gives traders no reason to jump back into risky trades.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com