Carry Trades Extend Losses as Stocks Reverse
The price action in carry trades or Japanese Yen crosses were extremely interesting today.
Over the past few weeks, we have talked repeatedly about how the correlation between US equities and carry trades are breaking down. This morning, when the Dow was up over 100 points, carry trades refused to budge. However, when stocks started to reverse to end the day down 65 points, carry trades sold off aggressively. This indicates that risk aversion is very high in the markets right now and traders are waiting for any reason to sell carry.