Given this recent rout has been due to the Yen carry trade, the...

Given this recent rout has been due to the Yen carry trade, the strength or more to the point weakness of the Yen will dictate selling pressures for most markets. I heard on Bloomberg the Yen carry trade could be worth as much as 15 to 20 trillion USD, so could take a while to unwind.

As the RBJ has said they want to raise interest rates and it has long been a goal of their governor, that is likely and perhaps inevitable over time.

Given this, any weakness in the Yen is likely to be used by traders to unwind their positions ( Selling BONDS, CRYPTO, REALESTATE, ANYTHING) and buying Yen.

So if this is the case we should see a correlation between the USD YEN pair and the SPX. Also for the XJO. However given the much smaller size of the australian market most action will be dictated by the USD/JPY, and S&P500. Index strength can also help drive the selldown but i think the currency pair will be the dominant factor.

So have a look at the correlations on the following chart. Bar chart is USD/JPY. Orange line is XJO and blue line is SPX. They are both following the changes in the USD/JPY. (Note yellow boxes are australian equity trading hours and purple US.)

Ill keep an eye on it for coming days to see if this remains the case, but suspect this dynamic will dictate our markets for a while!