The yen soared and the pound was hammered in a year of exceptional volatility for international currency markets. Until July, the carry trade, in which low-yielding currencies are sold to finance the purchase of riskier, higher-yielding assets, was still in full swing, with the yen plunging to record lows to the euro.
But, the yen was the star performer in the second half of the year as the financial crisis prompted a dramatic unwinding of the carry trade. The yen’s trade- weighted index soared almost 30 per cent in 2008, the biggest rise since the currency was allowed to float freely in 1973.
