Thursday, January 11, 2007
The whiplash continues.
Just when it all looked like going horribly wrong for just about everything, the benign US trade figure prompted a surge in the dollar, and the subsequent upward revisions to Q4 growth (gee, 3%-ish growth seems awfully high for a recession) helped spur a recovery in stocks and risky EM currencies.
The overnight session has featured a continued rally in high yielding currencies (thanks in part to a strong employment report in Oz) and a concomitant collapse in funders. The yen is particularly interesting in this regard, as so far this year USD/JPY, EUR/JPY, NZD/JPY, etc. have all eclipsed their 2006 highs. For the past twelve months, 120 has been a severe resistance for USD/JPY, and after a significant battle this morning, the level finally went.