The Nikkei took its cue from the strong Friday finish of the DJIA rising more than 450 points as a sense of stability returned to the financial markets.

Another wild and crazy night of volatility in the currency markets sent the USD/JPY to its lowest level in more than a year.

Overnight the Nikkei dropped another 2%, and both DAX and Footsie opened markedly lower as fear dominates financial markets against the backdrop of mounting credit market problems and anticipation of a slowdown in global economic growth.

More tremors in global financial markets sent carry trades lower as investors liquidated all risky positions, sending EUR/JPY nearly 200 points lower while USD/JPY approached the critical 116.50 level.

UK CPI data shocked to the downside today dipping below the 2% BoE target rate for the first time since March of 2006.

Currency strategist Boris Schlossberg analyzes the major currencies for the week of August 13.

Fears of further problems among financial institutions dogged the currency markets at the start of the week as ECB announced yet another tender offer to infuse more liquidity into the jittery European money markets.

The announcement by France’s largest bank that they were freezing redemptions from investments into two of their funds triggered a broad market reaction that was carried around the world.

The currency markets were roiled by the continuing fallout from the sub-prime crisis after BNP Paribas announced that it is freezing redemptions in three asset-backed securities funds due to inability to fairly value their holdings.

The yen was once again the weakest major overnight with USD/JPY rising to a high of 119.40 by early London trade.