Yen Falls to Record Lows Today

Sterling and the New Zealand dollar were also beneficiaries of the carry trade, with the former approaching $2 for the first time since late April. Both were at multiyear highs against the yen. Unlike the yen, the Swiss franc surged higher on Friday, with the dollar plunging 0.8 percent to 1.2310 francs and the euro down 0.4 percent at 1.6565 francs . The Swiss government revised up its growth forecasts for this year and next and its 2008 inflation outlook, while the central bank let overnight repo rates rise a week after lifting the benchmark lending rate to 2.5 percent. After the yen, the Swiss franc was a favored funding currency for carry trades, but on Friday, it approached a 15-year high against the Japanese currency.

Divyang Shah, strategist at Commonwealth Bank in London, said the price action marks "an important turning point for the carry trade." "It seems that central banks of the carry trade currencies are starting to do something about what they see as excessive risk taking," he said. Earlier this month, the Reserve Bank of New Zealand tried to weaken its currency -- a favorite target of carry traders -- by intervening in the market, though speculators continued to pour money into the market to reap 8 percent interest rates. The kiwi rose above $0.7680 on Friday, the highest since being floated in 1985, sparking market talk that the central bank could re-enter the market at or above $0.77.