RTTNews - Tuesday in Asia, the Japanese yen rose to new multi-week highs against its major counterparts as the global stock market sell-off triggered large scale unwinding of carry trade positions. In carry trade, investors borrow money from Japan where the interest rate is low to buy high yielding assets in other countries. So, an unwinding of carry trades results in traders liquidating their investments and scrambling for yen to repay their yen-denominated loans, which pushes up the value of the Japanese currency. The dollar and yen tend to gain ground relative to other currencies in times of uncertainty. But the yen becomes the currency of choice for its perceived safety, outperforming the dollar. On concerns that the global economy will take a fairly long time to recover, investors across the Asia-Pacific region are seen pressing heavy sales today. The World Bank's prediction of a sharper contraction for the global economy had taken a toll on the European and the U.S. markets yesterday, and it is now the turn of the Asian markets to embark on a journey down south. The Washington-based lender now forecasts the world economy to shrink 2.9% this year, larger than its earlier prediction of a 1.7% decrease. In a report released on June 11, the lender had predicted the economy to shrink close to 3% in 2009. Global GDP is forecast to rebound with 2% growth next year and 3.2% by 2011. The World Bank expects developing economies to grow 1.2% this year, following 5.9% growth in 2008. The growth estimate for 2009 is much lower than the 2.1% expansion estimated in March. Following a slow growth in 2009, the bank sees a higher 4.4% growth in 2010 and 5.7% in 2011, albeit subdued relative to the strong performance before the current crisis. Japan's Nikkei stock index fell over 3 percent today morning to its lowest intraday level in three weeks, after Wall Street tumbled overnight on rekindled economic jitters, while lower commodity prices and a stronger yen added to the broad-based decline. The 225-issue Nikkei Stock Average lost 303.26 points, or 3.09 percent, from Monday to 9,523.01, falling into the 9,500 range for the first time since June 1. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 24.37 points, or 2.64 percent, to 898.11. It fell below 900 for the first time also in three weeks on an intraday basis. Against the US dollar, the Japanese yen edged higher to 95.13 during early Asian deals on Tuesday. This set the highest point for the yen since June 1, 2009. The next upside target level for the Japanese currency is seen around 94.6. The dollar-yen pair closed Monday's North American session at 95.88.

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