It's a mystery

The Associated Press: World markets slump as Nikkei hits 26-year low

I don't know about my average reader, but one of the most puzzling things I find about economics is understanding how currency markets are supposed to make any sense. For example: why is the Yen surging, and in the process causing the Nikkei to drop:

"Worries about the impact of the surging yen on Japanese export earnings have hit the Nikkei hard," said Julian Jessop, chief international economist at Capital Economics.

"This in turn has led to sharp falls in European markets even when, as on Friday, the U.S. had closed higher the day before," he added.

On the radio, it was said that if you invested in Japan 26 years ago, you would now just be "even". Puts our superannuation losses in perspective, one suspects.

Why is the Australian dollar taking such a battering?

Why are economists held in any esteem whatsoever?

UPDATE: here's some explanation of what's happening via Bloomsberg. It still doesn't make any sense to me. For example:

The Australian dollar plunged to a five-year low against the greenback, as concern over a global recession led investors to buy the U.S. dollar as a safe haven. New Zealand's currency gained.

Why is the US dollar a "safe haven"? And why did that powerhouse New Zealand have its currency go up? All very odd and counter-intuitive, if you ask me.

UPDATE 2: here's a better, more detailed explanation of what's going on with the Yen.