The USD JPY reversed its four day rally as traders sought safety in lower yielding assets following an announcement by President Obama to curb trading at financial institutions. The immediate reaction was to sell higher risk assets after Obama called for a reduction in the size and trading activities of financial institutions.
Global stock prices continued to rise overnight following a sell-off in the Dollar, signaling greater demand for higher yielding assets. The thought of a recovery in the U.S. economy is also contributing to the strength. Money is shifting out of U.S. Treasuries and into equities as end-of-the-year asset allocation continues.
Even if markets are efficient, there's an informational skew towards event risk in market perception right now. The thing about event risk is that it's valuation is probabilistic but the events are concrete -either they happen or they don't.
