How does an earthquake triggered on 3/11, a tidal wave and nuclear crisis in Japan affects the global financial markets..? Some brief news from the tabloids:
1). Japanese insurance companies are selling foreign holdings to pay out domestic claims
2). Japanese companies and individuals are liquidating their overseas assets into cash for rebuilding/reconstruction at home. Japanese yen will soar in short term.
3). Australian dollar will dip in short term as Japanese close their "carry-trade" position in Australian's high yield account. In the mid to long term, AUD will recover as Japan buys shipments of wheat and base metals with coals for rebuilding.
4). Investors will perpetuate such trends in the short term, aggravating the fear of a new global geo-political crisis and economic downturn.
G7 recently attempts to stabilise the soaring yen which threaten the Japanese economy recovery prospects following the March 11th quake and tsunami by selling down the yen.
"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate."