US Dollar down with optimism triggers demand for carry trades

The US dollar and Japanese yen were the lowest of the majors as investor confidence increased, leading up FX carry trades and sending the DJIA and S&P 500 up approximately 3 %. For proof that the dollar’s drop was caused by risk trends and not by fundamentals, the US data has to be examined. First, the US consumer price index (CPI) went up in excess of what was expected at a rate of 0.7 % in June, triggered by energy prices, although the yearly rate went down to -1.4. For the meantime, the Federal Reserve Bank of New York's "Empire" manufacturing index increased dramatically to a 15-month high of -0.55 in July from -9.41, with a breakdown of the report indicating a increase in prices paid, new orders, and shipments.