Morning Bid: Volatility shock fades, India CPI on deck
Seven days ago a huge unwind in the yen carry trade and selloff in megacap U.S. tech triggered a wave of volatility that sent global markets reeling and investors running for the safety of U.S. Treasuries.
The question now is whether that momentum can be sustained. Some investors will seize upon lower equity volatility to push up risky assets again; others will be wary of potential aftershocks in any corner of the market, especially in mid-August when liquidity is much thinner than usual. In currencies, U.S. futures market data on Friday showed that hedge funds slashed their net short yen position in the week to Aug. 6 by 62,000 contracts. That is the biggest yen-bullish weekly swing since the Fukushima disaster in February 2011, and third biggest since comparable data started in 1986.
Indian inflation is the main data point in Asia and comes after the Reserve Bank of India last week kept its key interest rate unchanged at 6.50%, dismissing the market turbulence and focusing on getting inflation down to its 4% medium term target.
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