The Dow dropped 175 points today, erasing nearly all of yesterday's gains, but carry trades were mixed with some pairs like AUD/JPY and CHF/JPY gaining strength while others like GBP/JPY and USD/JPY selling off.
This price action confirms our belief that the relationship between stocks and carry trades continue to breakdown even though we can still see some evidence of a mild correlation on an intraday basis. Japanese economic data was good with GDP rising from 0.4 to 0.9 percent in the fourth quarter and industrial production accelerating more than expected on an annualized basis.
The Bank of Japan will be making their interest rate decision this evening. They are not expected to raise interest rates and the announcement should be a non-event for the Japanese Yen.
