As stock markets around the world fall the yen rose against the dollar as investors reduce holdings of higher-yielding assets bought with money borrowed in Japan.

This morning the dollar stood at 116.02 yen and the greenback was at 1.3200 to the euro. The South Korean won was at 8.149 to the yen.

Concerns about the US economy and mortgage industry saw markets in Asia and Europe fall, following on from a drop on Wall Street.

This morning the FTSE was down 110.4 points, or 1.8 per cent, while Japan's Nikkei index closed 2.9 per cent lower, and New York's Dow Jones index ended down two per cent.

"The yen should benefit as the unwind of the carry trade continues,"
Tony Morriss, a currency strategist at Australia & New Zealand Banking, told Bloomberg.

"With stock markets very jittery and concern over the US financial system, there will continue to be an atmosphere where risk is removed."