The Norwegian Krone's rally is continuing despite oil prices not reaching new highs. This is attributed to the high absolute level of carry (interest rate differential) attracting inflows, suggesting that a currency can appreciate in a carry-friendly environment even if its rate spreads are not actively widening.
Despite a series of soft economic reports, the British pound has strengthened. This counterintuitive move is attributed to a temporary lull in negative political news, which allows the attractive carry environment to dominate market sentiment and forces short-sellers to cover their positions.
Investor sentiment is shifting to bearish on the Australian dollar. While fundamentals like energy prices remain supportive, the market believes the Reserve Bank of Australia's (RBA) rate hike cycle has concluded. This removal of a key central bank tailwind is prompting investors to position for weakness.
Despite having significant resources, Japan's Ministry of Finance cannot permanently reverse the yen's weakness if it is driven by powerful fundamentals like broad US dollar strength. Analysts believe authorities will eventually be forced to abandon their defense of the 160 level to avoid appearing ineffective and depleting reserves.