There is some evidence that international financial markets are thawing.
- The "Ted Spread" (the difference between interest rates on interbank loans and U.S. goverment debt) is declining. The financial crisis had driven up the Ted Spread as investors cared most about the return of their investment and the panic induced a flight to quality.
So much for the good news.
The 10% decline of the dollar in the past 5 weeks signals that carry trade is back again in full force since it weakens the target currency (in this case the dollar) when investors sell domestic currency to purchase foreign assets (The Fed also provides an assessment of carry trading). As recently as 6 months ago, carry trades unraveled at lightening speed (driving up the Ted Spread) as financial institutions were force to deleverage to meet their capital requirements.