With the credit market freezing up on the news of AIG’s massive writedown and the lack of progress in reaching a deal for rescuing bond insurer Ambac, the funding currencies of the carry trade were fueled for yet another astronomical rally.
The yen rallied to a three-year high against the dollar with a three day move that has totaled nearly 350 points. The franc has done even better in four days with 480 points and a record high just short of 1.04 against the greenback. The number of rate decisions next week should have an interesting impact on risk.