TOKYO: The yen is snapping an eight-year slide against the euro and Australian dollar as the abrupt global economic slowdown forces investors to unwind long-entrenched positions, pushing these currencies into a downtrend.

The sudden shift in the outlook toward interest rate cuts in economies such as the euro zone took investors by surprise, spurring them to cut back on risky carry trades using the low-yielding yen to buy high-yielding currencies.

The move has also coincided with the dollar’s broad recovery, with the spreading weakness beyond the United States forcing some investors to abandon bets on a “decoupled” global economy. Most major currencies, oil and commodities have tumbled.

The Japanese currency rallied about 3 percent against the Australian and New Zealand dollars this week and 2 percent against the euro.

The sharp drop in higher-yielding currencies against the yen is likely to persist until investors fully factor in the global economy’s deterioration. Even Japan’s steady investment abroad that has kept the yen weak may not be enough to offset such selling pressure.“Selling of yen crosses is driven by the shift in focus to economic weakness in countries where inflation concerns had supported views for rising rates,” said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.

Nowhere has that been more stark than in Australia, where the central bank cut rates by a quarter-point this week to 7 percent just six months after raising them.

The abrupt shift in expectations sent the Aussie dollar sliding 9 percent against the yen in August — the biggest monthly drop in a decade. “Among the weak economies, currencies of countries with bigger surprises have more scope for falling for now, with investors scaling back risky investments,” Tomita said.

The yen hit a two-year high against the New Zealand dollar and a five-month high against the Australian dollar on Wednesday, even as Australia and New Zealand still offer the highest interest rates among developed nations at 7 percent and 8 percent, respectively.

Australia’s rate cut was the first in seven years, while New Zealand trimmed rates in July for the first time in five years. Both countries’ central banks are expected to cut rates further.

Sterling and the euro touched five-month lows against the yen as more investors see the European Central Bank and the Bank of England lowering rates in coming months, with inflation concerns easing after oil’s 30 percent fall from its record peak in July.

“Investors are unwinding positions in the yen crosses on the growing view that these currencies have now entered a medium- to long-term downtrend,” said Hiroshi Yoshida, a trader at Shinkin Central Bank.

Analysts say the euro, sterling, Aussie and kiwi all appear to have entered downward trends from long-term peaks, and technical charts were also seen pointing to more weaknessThe euro was likely to eventually break below a rough 150-170 yen range in place since November 2006, said Masashi Hashimoto, senior analyst for Bank of Tokyo-Mitsubishi UFJ.

“For now, levels around 150 yen are coming in to view,” he said.