U.S. Treasury Secretary Henry Paulson's announcement that the Treasury would no longer consider using TARP (Troubled Asset Relief Program) funds to buy illiquid assets sent shivers down Wall Street's spine today. When you add bad news from Applied Materials and Best Buy and a sub-$300 share price for Google (GOOG) on top of that, you have the makings for a terrible day in the stock market. The Dow Jones Industrial Average fell 411 points today—placing the index precariously close to its support level at 8,000.

We've seen during the past few months that the higher the VIX goes, the more investors tend to flock to the relative safety of the U.S. dollar (USD) and the Japanese yen (JPY). Investors push up demand for the USD because they are buying USD-based assets, and they push up demand for the JPY because they are unwinding their riskier trades in which they were short the JPY.