Intraday FX Heatmap: Carry Unwind

Rather simple day in FX land: in a word (or two) - risk off. The Yen is surging against all currencies, the Euro is weaker against pretty much everything (thanks Greece), with the USD one again a conduit between the JPY and the EUR carry. An interesting observation on currency trading via an email in our tip box:

  • Hedge funds and props of all stripes switched to FX trading en masse aka going long USD vs. anything else and shorting EUR against everything.   That includes "not quite so smart" money -- insurance companies and bond investment outfits.
  • HFTs and stat arb quants run arb strats on DXY, int rates, equities against FX moves creating totally surreal enviroment where short term histrorical correlations mean more vs. anything.

The entire stock market is now one big liquidity/carry trade.