Yen rallies as world falls apart: FX strategist

Is US economy at risk?
Is US economy at risk?   

The yen's surge to 15-month highs against the dollar Thursday reveals deep problems in global markets, according to Steven Englander, global head of currency and G-10 strategy at Citigroup.

"It's rallying because it's a safe haven currency and the world's falling apart," Englander told CNBC's "Worldwide Exchange." "It's not rallying because there are negative interest rates."

The Bank of Japan and other central banks are working to ease investor doubt that monetary easing is still a reliable backstop.

"The perception is that they're ineffective," Englander said. "I think central banks are going to need more time to actually come up with tools to address the problems that markets are concerned about now."

With Federal Reserve Chair Janet Yellen testifying on Capitol Hill this week, Englander said investors were looking for two things: confidence the U.S. is stable in terms of growth, and reassurance there's "something on the table" besides negative rates or more quantitative easing.

Euro zone banks continued their slide Thursday, down more than 25 percent this year. Political issues, such as border control, also remain key concerns for European Central Bank policy, Englander said.

"Getting the strongest growth possible is the best way of avoiding these tensions and I think that's what they're going to go for," he added, referring to ECB President Mario Draghi's recent speeches. "They have to avoid tanking the banks, which are clearly vulnerable."

Equities and credit around the world, Englander said, are the asset classes leading the charge and spilling into the foreign exchange market.

"Look at three to five years out, the market is pricing in this prolonged period of weakness," he said. "I think that's what the deep fear is in the market."