With an empty economic docket, the Japanese yen was left to exogenous event risk Tuesday. However, it has become blatantly clear in the past year, that scheduled Japanese data hardly registers when compared to the influence risk appetite and aversion has on the carry sensitive currency.

Through the day, equities were set to modest advances while bond yields in Europe and the US actually contracted. This left yen traders to speculate on the health of the global credit system which may be looking at another violent contraction depending on whether calls for a major US bank to fail or that the Fannie Mae/Freddie Mac combo will need to be bailed out proves true. Comments in the FOMC minutes didn’t dismiss such a possibility. What’s more, data released today has further shown that banks and thrifts’ second quarter profits were at their lowest levels since 1991, just as the FDIC increased it bank watch list to 117 firms. Conditions certainly don’t look promising for credit and the carry.