Risk Appetite Favors Commodity Currencies

March 31, 2009 by Trader Rich

Japanese yen falls in forex trading

Yesterday, risk aversion sent the Japanese yen higher in forex trading. Today, the story is reversed, underscoring the volatility of the FX market. Then yen is moving lower in currency trading today as risk appetite increases and the carry trade makes a bit of a comeback.

Commodity currencies — especially the Australian dollar — are making solid gains against the yen in forex trading. The superior yields offered by commodity currencies are creating a situation in which forex traders are trying their luck at the carry trade.

With the U.S. stock market gaining this morning, a return to a certain level of risk appetite is being seen, and that is favoring currencies with higher yields.