Dollar makes gains on major rivals as investors sell riskier assets

US Dollar:
Investors are moving into safe instruments again as worries mount in Europe and Bernanke speaks about continued low interest rates in US as world economies struggle with financial the recovery. The issue that Greece’s debt problems could spread to other Southern European countries, such as Spain are making players run for safe haven currencies such as the dollar and yen. Bernanke said yesterday that tough economic condi¬tions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Fed’s decision last week to hike interest charged on emergency loans for banks fuelled speculation of a possible broader rate hike affecting consumer and business spending. Such comments would normally see the dollar weaken, but in these times of uncertainty in financial markets, the dollar is seen as a safe place to put your funds, hence the dramatic rally in the greenback overnight. We have now seen EUR/USD roar to $1.3451 in the dollars favour, a full one and a half cent gain for the buck. Morgan Stanley’s John Mack has stated that Greece has really spooked the market of EUR/USD currency trading. He says his firm expects EUR/USD to end the year at $1.25. The dollar has also taken two cents off sterling to trade at $1.5330.
Data: 13.30: Durable Goods orders 1.4% from 0.3%. 15.00: House Price Index.                         
            
Pound:
A mixed day for sterling saw the pound hold its ground against the single currency but give up all the gains it made against the dollar last week. A run for cover in the currency markets saw funds flow out the pound and euro to the safe haven of the dollar. This saw cable give up over two cents since yesterday afternoon, fal¬ling from $1.5465 to trade under $1.5320 this morning. Against the euro, we did see some support around the 1.14 level as the single currency continued its battle with its own euro demons—namely Greek debt worries. But this is a very precarious place to be when you are relying on another countries woes to support your own cur¬rency. We have had the RBS figures out of the UK this morning, which have shown a £3.5bn loss for 2009, compared with the £24bn it lost in 2008.  Data: Total Business Investment QoQ 0.1% from –0.6%.     

Euro:
The euro took yet another hit against the dollar yesterday and has continued to be aggressively sold off in this mornings trading session. Greece in weighing on investors minds as thousands of people took to the streets in Athens Wednesday to protest against the governments austerity measures aimed at ending the crises and a strike brought the country to a standstill. Standard & Poor’s added pressure on the euro , saying it could further downgrade Greece’s sovereign credit rating in the month ahead, citing risks to the country’s growth forecast and weak public support for its reform measures. The euro has tried to go up this week but keeps getting knocked back by deteriorating news surrounding Greece. The single currency looks doomed to fall further as the year progresses, even if it can get a short term reprieve. Cracks seemed to be appearing in the Eurozone as the Deputy Prime Minister of Greece, Theodoros Pangalos said Germany had no right to reproach Greece for any¬thing after it devastated the country under Nazi occupation. He said “They took away the gold that was in the Bank of Greece, and they never gave it back. They shouldn’t complain so much about stealing and not be very specific about economic dealings.” As far as I can see, not a very clever way of asking your biggest financial backer to help you out in your hour of need—go the Greeks!! Data: 10.00: E/Zone Economic Confidence, Consumer Confidence and Business Climate Indictor.             
                           
General:
•  Oil rallied to $80/barrel and gold was little changed at $1,096.80 a troy ounce.            
   

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