Yen gains on rise in risk aversion

You can always tell when markets are nervous when the yen rises, as it did yesterday. Bloomberg reports:

The yen rose the most in six weeks against the euro as a decline in global stocks prompted investors to sell higher-yielding assets funded by loans in Japan.

Japan's currency gained for a fifth day versus the dollar, the longest winning streak in almost a year, and posted its best week against the euro in two months, as the risk of holding corporate debt increased...

"Risk aversion is the name of the game and people are cutting back risks," said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York...

Against the dollar, the Japanese currency advanced to 114.51, from 115.63 yesterday. It also gained against all 16 most-actively traded currencies...

The Dow Jones Industrial Average lost 367 points and closed at the lowest since the Federal Reserve cut its benchmark lending rate Sept. 18. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to their worst week since 2002 after Wachovia Corp. said loan defaults lowered profit. Energy producers dropped the most in two years...

In a sign of growing credit market risk, the CDX North America Investment Grade Index has climbed 10 basis points this week, according to Deutsche Bank AG in New York, the biggest weekly increase since July 27. It rose 1.75 basis points today to 56 basis points...

Interest-rate futures traded on the Chicago Board of Trade show a 92 percent chance the Fed will cut the target rate for overnight loans a second time this year to 4.5 percent on Oct. 31. The odds were 32 percent a week ago.

It wasn't exactly Black Friday, but will it be Black Monday? We'll know in a few days' time.