Dealers note talk that a newly formed US bank holding company (narrow the field, anyone?) sold somewhere between AUD 5 and 8 bln overnight. This dragged USD/JPY down to the 98.60 level and helped fuel the decline in the Nikkei. The thinking behind the trade is said to be the implosion of the conditions that fostered the carry trade. Carry trades (buying high-yielding assets with low-yielding currencies) prosper amid low volatility and fast economic growth for the high-yielding leg of the trade. Those conditions are presently “inoperative” .
AUD/JPY fell a breathtaking 9 yen overnight to 63.75. In July, we were 104…
