Yen Surges On Risk Aversion

Last week, The yen rose sharply across the board on rising concerns over the credit market. The currency hit a 1 ½ year high at 110.52 versus the dollar. The euro dropped from 166 to just above 162 against the yen, and the sterling slumped 7 big figures to as low as 231.20 versus the yen.

Fed Chairman Bernanke said yesterday in Congressional Testimony that the contraction in housing market may continue to drag the economy and the nation's economic growth is likely to slow down noticeably. His comments raised worries over the housing and credit market, increasing the case for another quarter-percentage point rate cut in December. For fear of further losses in banks from subprime related investments, investors cut back risk appetite and therefore wound the carry trades.

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