Japanese Yen soars as investors pull out

The Japanese Yen rose sharply against the dollar on speculation the U.S. plan to invest $250 billion in financial institutions won't prevent the world's largest economy from falling into a recession. The Yen gained versus the euro as U.S. stocks plunged, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan. The dollar extended its loss against the yen after a U.S. Commerce Department report showed retail sales declined in September by the most in three years. ``Yen buying is still the mainstream trade because of risk aversion,'' said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. ``We are in a recession. People need to buy the yen in case the stock market collapses.'' The USD/JPY is currently trading is trading at 100.41 as of 8:26am, GMT.

The Australian dollar fell as stocks and commodity prices declined on concern a $3 trillion effort to shore up the global financial system will fail to prevent a global economic recession. The Australian currency retreated after yesterday's record gain against the yen as U.S. equities dropped on speculation company earnings will weaken due to slumping demand. The Australian dollar ended two days of gains against the U.S. currency as prices of commodities the nation export declined. ``Some of the euphoria of the last session has faded,'' said Greg Gibbs, a currency strategist at ABN Amro Australia Ltd. in Sydney. The Australian dollar ``found a near-term top around 72-odd overnight and we've come off in concert with a generally firmer U.S. dollar.'' The AUD/USD is currently trading at 0.6732 as of 8:25am, GMT.

Sterling held firm against the dollar and the euro on Thursday, still sustained by a favourable view of Britain's bank recapitalisation action even as recent data portrayed deepening domestic economic weakness. "With all these rescue plans being delivered by various countries, the UK has essentially taken the lead," said Adarsh Sinha, senior FX strategist at Barclays Capital in London. The GBP/USD is currently trading at 1.7230 as of 8:24am, GMT

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