Risk aversion sends yen to 13-year high versus U.S. dollar

Mounting worries over emerging markets and prospects for a global recession fueled another sharp rise by the Japanese yen Friday, sending the unit to its strongest level against the U.S. dollar in 13 years. The dollar gained against most other currencies, with the British pound and the euro again falling sharply. "Risk aversion continues to dominate across markets, leaving little room for a significant (Japanese yen) trend reversal for now: carry trade unwinding should thus support the Japanese unit further," wrote strategists at UniCredit MIB. Carry trades rely on borrowing funds in low-yielding currencies, such as the yen, and then buying assets denominated in higher-yielding currencies. Such trades once kept the yen under pressure, but the turmoil created by the financial crisis has seen the yen become the ultimate safe-haven currency as traders shun carry strategies. The Japanese unit traded at 95.10 yen to the dollar, down from 97.26 yen in North American trade late Thursday, after hitting 94.75 yen, the yen's strongest showing versus the dollar since 1995. The Japanese currency traded at 120.72 yen to the euro, down from 125.66 yen late Thursday, and traded as low as 120.28, according to FactSet, its strongest reading against the single currency in nearly six years.