Dollar and Yen Soar as Markets Panic, DOW Drops 998 Before Closing Down -347 Pts

[Forex-Outlook]

Dollar and yen surge in US session as risk averse investors rush out of stocks today on deep worry that debt problems in the Eurozone will hit the global economy. Investors are clearly dissatisfied with the lack of action from ECB and Trichet's comment that there was no discussing on bond purchase was a big disappointment. Moody's then came out with warning of contagion effect to Portugal, Spain, Italy, Ireland, and UK. Fed officials also expressed their concern that financial turbulent in Europe could have repercussions for US. Saint Louis Fed Bullard said "One risk to the outlook ... is the fallout from potential sovereign debt default as conditions continue to deteriorate in Greece and other countries." Richmond Fed Lacker said problem in Greece "has the potential to develop into something that has noticeable effects."

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