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A pedestrian holding an umbrella stands in front of a stock quotation board displaying currency exchange rates outside a brokerage in Tokyo June 11, 2013. The dollar fell sharply against the yen on Tuesday, hurt by a 3 percent drop in Nikkei share futures after the Bank of Japan refrained from taking additional measures to curb recent bond market volatility.
A pedestrian holding an umbrella stands in front of a stock quotation board displaying currency exchange rates outside a brokerage in Tokyo June 11, 2013. The dollar fell sharply against the yen on Tuesday, hurt by a 3 percent drop in Nikkei share futures after the Bank of Japan refrained from taking additional measures to curb recent bond market volatility.
(Yuya Shino/Reuters)

SCOTT BARLOW

Hedge funds’ Abenomics play driving U.S. markets

ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.

Most investors are aware that Abenomics is having an effect on global equity markets, but the extent of the connection is truly remarkable. In statistical terms the yen and S&P 500 are moving in exact lock step, and the leveraged yen carry trade, a staple among hedge funds globally, goes a long way toward explaining it. The trade also provides a partial explanation for the extreme levels of U.S. market volatility since mid-May.