Commodity currencies are gaining traction as the yen treads water.
The team at SocGen discuss the carry trade:
Here is their view, courtesy of eFXnews:
There’s a carry-happy mood in markets, with equities higher, oil prices up, commodities bouncing and investors eyeing an opportunity to add some risk to portfolios for Q4, notes SocGen.
“The 1.75% rally in IDR overnight, which has no basis in economic data, but is entirely driven by bargain-hunters and short-sellers being squeezed out, sums it up.
…However, within G10, the loser ‘ought’ to be the yen. 10-year Treasury yields are back above 2% and equities are up, the perfect mix for USD/JPY to head higher, you might think,”SocGen adds.
“That the yen is marginally stronger against both USD and EUR may tell us that it’s going to struggle to weaken much further in the next couple of weeks. The BOJ meeting at the end of the month is expected to result in further easing, and failure to act could trigger another test of the downside in USD/JPY,” SocGen argues.
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