NEW YORK (MarketWatch) -- The yen rallied sharply against most other major currencies Friday, as another sell-off in the U.S. stock market prompted investors to flee riskier assets funded by cheap borrowing in the Japanese currency.

The yen surged 1.4% against the British pound, 2.7% against the Australian dollar, and 2.4% against the New Zealand dollar on carry-trade unwinding. Carry trades refer to the practice of borrowing in low-yielding currencies, such as the yen or the Swiss franc, and reinvesting in higher-return currencies and assets.

"While the dollar was rebounding against the European and emerging-market currencies, it succumbed to selling pressure against the yen as carry trades began to unwind this week on growing risk aversion," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.
Late in New York, the euro stood at $1.3642, compared with $1.3744 late Thursday, after earlier touching $1.3628, the lowest level since July 10. The dollar was quoted at 118.79 yen, compared with 118.76 yen.

The dollar ended mixed on the week, rising 1.4% against the euro, but down 2.1% against the yen.

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