MNI analysis shows that the recent..........>

OUTLOOK: MNI analysis shows that the recent breakdown in correlation between

average and maximum carry in G10 FX space is a risk-off signal:

-Higher US yields and narrowing yield differentials are not only starting to

favour the USD, but the accompanying spike in global asset market volatility

also suggests the potential for broader disruption to investor risk appetite and

high beta currencies.

-The MNI Market News Dynamic G10 Carry Indicator shows that the average carry in

the G10 remains steady, while the maximum carry available among the G10

currencies is still close to cycle lows abd only fractionally above US yields.

-USD based investors, therefore, have little incentive to take on currency risk

when international returns are below those at home. The USD could benefit from

both higher US yields and the increased risk associated with external

alternatives, namely increased volatility among high-beta currencies.

-The current renewed and sharp divergence of yields and equities is consistent

with a risk-off environment and represents a challenge to investor sentiment.

-See 'MNI Exclusive Analysis: Dollar Disruption' email.