Carry Trades Could Pull Back Following Treasury Secretary Paulson's Speech

US Treasury Secretary Henry Paulson spoke on the Treasury's efforts to held remove some of the toxic debt on the books of financial institutions, saying that they will expand their mortgage-backed security (MBS) purchase program announced earlier in the month. Furthermore, Mr. Paulson said that Fannie Mae and Freddie Mac would increase their MBS purchases, and that a permanent plan would likely be made over the weekend to address the stresses in the financial markets. The move should help to alleviate some of the pressures on banks, but it will be interesting to see how they decide to value these assets.

The DJIA has pulled back from its morning highs of 11,475.16 on Mr. Paulson's speech and is currently trading near 11,340 while the rally in the JPY crosses has cooled. Looking at USD/JPY specifically, the pair ran into resistance at 108 about an hour ago, and may target support at 107.25 in the near-term while break below there will likely fall toward 106.65.

DailyFX

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