Trade action suggests that appetite for yield from Japanese retail investors remains insatiable despite the continuous woes in global credit markets.

Another round of risk aversion hit the currency market during the Asian session.

Currency strategist Boris Schlossberg analyzes the major currencies for the week of August 27.

With London closed for its last bank holiday until Christmas and a barren economic calendar in both Asia and Europe, the currency markets opened the week bouncing back and forth in directionless trade.

The majors spent most of the Asian and early European session quietly consolidating gains as calm finally returned to financial markets on a day with little fresh news from the sub-prime sector.

The recent plunge in USD/JPY which shaved nearly 1000 points off the yearly highs in a matter of weeks has many currency traders wondering if there is more downside to come.

Carry came back with a vengeance as calming news from the sub-prime market and reluctance of BOJ to raise rates beyond the current 0.50% level revived demand for high-yielding currencies across the board.

Both currency and equity markets stabilized overnight, and the general calm helped to support carry trades as various yen crosses firmed in Asia and early European trade.

Although the Nikkei bounced tonight ending up more than 1% on the day, the European bourses were considerably more jittery on fears of further fallout from the liquidity crisis that has gripped global financial markets.

Currency strategist Boris Schlossberg analyzes the major currencies for the week of August 20.