Yen’s 200+ point rally against the greenback tonight suggests that currency markets may be in for rough ride this week as risk aversion hits stocks and high beta currencies come under renewed selling pressure. News that the Obama administration is entertaining the possibility of a GM bankruptcy and has asked Rick Wagoner to step down from his post as chairman, sent Asian markets tumbling on fresh concerns over the possible economic fallout from such a move.

Lack of any concrete action from the G7 meeting over the weekend sparked another round of risk aversion in the currency market as dealing opened for the week. The G7 communiqué reaffirmed the member nations commitment to combat the growing global economic crisis but offered no new initiatives to stimulate their respective economies, providing no fresh news to investors.

Asian equity markets were all sharply lower despite news that US bailout package was nearing passage as traders questioned the efficacy of US efforts to stimulate its economy. Nikkei dropped by more than 2% as did the Hang Seng while Korean equities also finished lower despite the fact that Bank of Korea cut rates to a historic low of 2%.

The Asian equity markets reacted negatively to the news that the US stimulus package was ready for passage as traders grew increasingly skeptical about the bills efficacy to help revive the US economy. Most Asian equity bourses were lower by more than -2% and the European markets followed suit with declines of more than -1% in early London and Frankfurt trade.

Last week’s counter trend rally in GBP/USD came to a crushing halt in early London trade today as the unit slid nearly 300 points off its highs having reached key resistance at the 1.4500 level before the week-end. The worst snowstorm to hit UK in more than 15 years added to the sterling’s woes as businesses struggled to open at the start of the week. The primary cause for the down draft however was simple risk aversion and profit taking.