US equities run but risk trades doesn’t flow to FX

The Nasdaq is up 1.4% as Treasury yields retreat and the market sorts through the post-BOJ wreckage. The strength in stocks demonstrates that there is a mountain of cash on the sidelines looking for a dip to buy.

That kind of stock market performance would usually come with at least some strength from commodity currencies but that’s not evident at all right now. AUD is down 0.8% and the Canadian dollar is now lower on the day as well, with oil under some modest pressure. Month-end flows could be part of that equation but there are no easy answers here.

USD/JPY is 105 pips higher to 104.50 and appears to be benefiting from the risk trade, though there may also be a ‘sell the fact’ trade in the yen after all the rumours and changes. When you get past the poor communication, the yen is still the cheapest currency to borrow and fund carry trades with. So this is a BOJ move but is it the start of a hiking cycle? Not many people believe it is.