The Japanese yen strengthened broadly on Monday, hitting a 2 ½-year peak versus the Dollar as a rout in global stocks prompted investors to sharply reduce their exposure to risky, higher-yielding assets. The sell-off in stocks was broad and deep, with major European and Asian markets. Investors rushed for the safest and most liquid assets they could find, such as government bonds. Markets moves were fuelled by worries that the fiscal stimulus package worth up to $150 billion floated by President George W. Bush on Friday will not be enough to shore up a US economy that is feared to be either close to, or already in recession.

Yesterday, UsdJpy was down 1.16% at 105.63, intraday low and 2 ½-year low. EurJpy dropped 2.51% to 152.33 lowest of the day.

Futures markets are betting on the Federal Reserve cutting US interest rates this year down to 2.50% or lower, including as much as a 75bp cut at the bank's policy meeting next week. This aggressive pricing has also spilled over into European markets, where rates futures are now discounting more than 50bp cut from the European Central Bank this year compared with expectations at the start of the month of the bank staying on hold at 4% all year.

EurUsd fell 1.37% on Monday to 1.4422, slipping below 1.4500 for the first time in almost a month. GbpUsd was lower by 0.77% to 1.9404 close to 1.9000 intraday low. UsdChf jumped up 1.05% to 1.1099. Monday's choppy moves were on thinner volumes than usual, with US markets closed for the Martin Luther King Jr. holiday.