Currency Panic

How to Control a Currency Panic
Published: October 27, 2008

The financial crisis has ratcheted up a dangerous notch. The currency markets have gone topsy-turvy. The authorities now have to make some pretty big and delicate moves — something like performing microsurgery in a plane in turbulent skies.

The yen has risen by 40 percent against the euro since August, with most of that occurring in October.

This month, the Australian dollar has also fallen by 25 percent and the pound by 16 percent against the American dollar. Swings of this scale are alarming when they happen in the stock market . But they are petrifying in currency markets, because they make it virtually impossible to price exports or imports.

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Written by: EDWARD HADAS and HUGO DIXON