3SOF

Tuesday, April 26, 2011...

•   The dollar index this morning is weaker with the dollar/yen -0.17 yen and the euro/dollar +0.25 cents. The dollar index yesterday weakened on speculation that the FOMC this week will keep interest rates at a record low, which will keep the dollar's interest rate differentials weak: Dollar Index -0.122, USDJPY -0.017, EURUSD +0.00288.

                Bearish factors included (1) an early rally in commodity currencies against the dollar after crude oil rose to a 2-1/2 year high, and (2) speculation that the FOMC this week will keep interest rates at a record low, which may prompt inventors to shy away from dollar assets in favor of higher yielding ones.

                Bullish factors included (1) increased safe-haven demand for the dollar as the stock market declined, and (2) weakness in the yen against the dollar on speculation the BOJ this week will signal an increase in stimulus to help Japan's economy recover from its earthquake crisis.

Wednesday, April 27, 2011...

•   The dollar index this morning is weaker and posted a fresh 2-1/2 year low in overnight trade with the dollar/yen +0.69 yen and the euro/dollar +0.29 cents. The dollar index yesterday closed lower on speculation that the FOMC on Wednesday will keep interest rates at a record low along with strength in the euro which rallied to a 16-1/4 month high against the dollar on hawkish comments from ECB President Trichet: Dollar Index -0.149, USDJPY -0.277, EURUSD +0.0630.

                Bearish factors included (1) speculation that the FOMC on Wednesday will keep interest rates at a record low, which may prompt inventors to shy away from the dollar in favor of higher yielding assets, (2) comments from ECB President Trichet who said the ECB must continue "solidly anchoring" inflation expectations, which bolstered speculation for further ECB rate hikes, and (3) reduced safe-haven demand for the dollar after stock prices rallied to 2-3/4 year highs.

                Bullish factors included (1) a possi ble increase in the safe-haven demand for the dollar after credit-default swaps to insure Greek and Portuguese government debt jumped to records, which raises concern the European sovereign-debt crisis will worsen, (2) the stronger-than-expected Apr US consumer confidence, which is dollar supportive, and (3) comments from Treasury Secretary Geithner who reaffirmed the US commitment to a "strong dollar".

Thursday, April 28, 2011...

•   The dollar index this morning is weaker and fell to a fresh 2-3/4 year low in overnight trade with the dollar/yen -0.41 yen and the euro/dollar +0.18 cents. The dollar index yesterday fell to a 2-2/3 year low and closed lower after the Fed lowered its growth forecast for this year and said it will finish its QE2 bond purchase program: Dollar Index -0.318, USDJPY +0.598, EURUSD +0.01437.

                Bearish factors included (1) the action by the Fed to cut its growth forecast for the economy this year to 3.1% to 3.3% from a Jan forecast of 3.4% to 3.9% and to raise its core inflation estimate for this year to 1.3% to 1.6%, higher than a Jan estimate of 1.0% to 1.3%, (2) the action by the Fed to maintain its QE2 asset-purchase program, which further weakens the dollar's interest rate differentials, and (3) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-3/4 year high.

                Bullish factors included (1) a possible increase in the safe-haven demand for the dol lar after credit-default swaps to insure the government debts of Greece, Portugal and Ireland all rose to records, which raises concern the European sovereign-debt crisis will worsen, and (2) weakness in the yen after Standard & Poor's cut Japan's sovereign-rating outlook to "negative" from "stable," citing the costs for rebuilding after lest month's earthquake.

Friday, April 29, 2011...

•   The dollar index this morning is lower with the dollar/yen -0.19 yen and the euro/dollar +0.39 cents. The dollar index yesterday fell to a 2-3/4 year low and closed lower after weak US economic data undercut the dollar while the fall in Apr German unemployment to a 19-year low boosted the euro: Dollar Index -0.398, USDJPY -0.619, EURUSD +0.00345.

                Bearish factors included (1) weaker-than-expected US economic data that included slower-than-expected growth in Q1 US GDP and weekly initial jobless claims that rose to a 3-month high, and (2) strength in the euro which climbed to a 16-1/2 month high against the dollar after Apr German unemployment fell -37,000 to 2.97 million, a 19-year low along with supportive interest rate differentials for the euro as the 3-month Euribor rate rose to a 2-year high of 1.375%.

                Bullish factors included (1) the action by the BOJ to cut its growth estimate for the year ending Mar 2012 to 0.6% from a Jan prediction of 1.6%, which is yen negati ve, and (2) the unexpected decline in Mar French consumer spending, which is euro bearish.

Monday, May 2, 2011...

•   The dollar index this morning is weaker and fell to a fresh 2-3/4 year low in overnight trade with the dollar/yen +0.19 yen and the euro/dollar +0.36 cents. The dollar index last Friday tumbled to a 2-3/4 year low and settled lower as weaker-than-expected US manufacturing data undercut the dollar while an increase in Euro-Zone inflation boosted the euro to a 16-1/2 month high: Dollar Index -0.188, USDJPY -0.335, EURUSD -0.00142.

                Bearish factors included (1) the weaker-than-expected Apr Chicago purchasing mangers index, which indicates a slowdown in US manufacturing and is dollar negative, (2) early strength in the euro which rallied to a 16-1/2 month high against the dollar after the Apr Euro-Zone CPI estimate rose more than expected to a 2-1/2 year high, which bolsters speculation for additional ECB rate hikes, and (3) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-3/4 year high.

                Bullish factors included (1) the unexpected decline in Ma r German retail sales, which is euro negative, and (2) the stronger-than-expected Mar US personal spending, which indicates strength in the US economy and is dollar supportive.

Tuesday, May 3, 2011...

•   The dollar index this morning is higher with the dollar/yen -0.38 yen and the euro/dollar -0.39 cents. The dollar index yesterday relinquished an early rally and closed little changed as the dollar's interest rate differentials remain weak on speculation the Fed will keep interest rates at record lows while other central banks raise their rates: Dollar Index -0.188, USDJPY -0.335, EURUSD -0.00142. The dollar index fell to a 2-3/4 year low but erased its losses and closed little changed.

                Bearish factors included (1) strength in the euro which rallied to a 16-3/4 month high against the dollar on speculation the ECB will continue to tighten monetary policy after French and German PMI manufacturing indexes were unexpectedly revised upward, (2) comments from Jean-Claude Juncker, head of the Euro-Zone finance ministers, who said the euro's current strength is "not worrying" and won't hinder growth in the region, and (3) reduced safe-haven demand for the dollar aft er the S&P 500 climbed to a 2-3/4 year high.

                Bullish factors included (1) early strength in the dollar after news that Osama bin Laden was killed, which fueled speculation that the terror risk will get smaller for the US, and (2) the stronger than expected Apr ISM manufacturing index, which indicates economic strength and is dollar supportive.

Wednesday, May 4, 2011...

•   The dollar index this morning is lower with the dollar/yen +0.22 yen and the euro/dollar +0.32 cents. The dollar index yesterday settled slightly higher after Mar US factory orders rose more than expected: Dollar Index +0.189, USDJPY -0.296, EURUSD -0.00044.

                Bullish factors included (1) the larger-than-expected increase in Mar US factory orders and the unexpected upward revision to Feb factory orders, which signals economic strength and is dollar supportive, and (2) comments from Kansas City Fed President Hoenig who said there is a "pretty high" likelihood that the US economy will keep expanding after growth in Q1 was weaker than expected and that the Fed should begin withdrawing its monetary stimulus as part of efforts to "calm" concerns about inflation in the US.

                Bearish factors included (1) strength in the euro after Mar Euro-Zone producer prices accelerated more than expected to their fastest pace in 2-1/2 years, which bolsters the outlook for further ECB interest rate hikes, and (2) the prediction from Credit Suisse Group AG that the dollar will weaken to $1.50 per euro in the next 12 months on interest rate differentials and low volatility.

Thursday, May 5, 2011...

•   The dollar index this morning is weaker with the dollar/yen -0.80 yen and the euro/dollar +0.04 cents. The dollar index yesterday sank to a 2-3/4 year low on weak US economic data along with strength in the euro which rallied to a 17-month high against the dollar on speculation ECB President Trichet will signal further rate increases when he speaks on Thursday: Dollar Index -0.109, USDJPY -0.311, EURUSD +0.00017.

                Bearish factors included (1) weaker-than-expected US economic data on Apr ISM non-manufacturing and Apr ADP employment, which may prompt the Fed to keep interest rates at record lows and further weaken the dollar's interest rate differentials, (2) speculation that ECB President Trichet will signal further interest rate increases when he speaks at Thursday's monthly press conference, and (3) dollar negative comments from Boston Fed President Rosengren who said he sees "no reason" to raise interest rates amid higher oil prices.

                Bullish factors include d (1) increased safe-haven demand for the dollar after the equity market tumbled, and (2) the weaker-than-expected Mar Euro-Zone retail sales, which is euro negative.

Friday, May 6, 2011...

•   The dollar index this morning is little changed with the dollar/yen +0.17 yen and the euro/dollar -0.18 cents. The dollar index yesterday rebounded to a 1-week high after the euro tumbled when ECB President Trichet signaled the ECB may wait until after June to raise interest rates again: Dollar Index +1.163, USDJPY -0.443, EURUSD -0.03038.

                Bullish factors included (1) comments from ECB President Trichet, which were less hawkish than the markets were expecting, when he refrained from using the phrase "strong vigilance" against inflation, which signals the ECB may wait until after its June meeting to raise interest rates further, (2) the unexpected drop in Mar German factory orders, which is euro negative, and (3) the drop in the British pound to a 2-week low against the dollar after Apr UK PMI services fell more than expected to a 4-month low.

                Bearish factors included (1) the unexpected increase in weekly US jobless claims to an 8-1/2 month high, which signals economic weakness and may prompt the Fed to maintain its overly easy monetary policy, and (2) strength in the yen which rallied to a 1-1/2 month high against the dollar after Japanese Finance Minister Noda said the recent rally in the yen is due to dollar weakness, which signals the BOJ may refrain from further currency intervention to weaken the yen.

Monday, May 9, 2011...

•   The dollar index this morning is weaker with the dollar/yen +0.12 yen and the euro/dollar +0.86 cents. The dollar index last Friday rallied to a 2-1/2 week high on strong Apr US nonfarm payrolls and on a report that Greece was considering leaving the Euro-Zone: Dollar Index +0.647, USDJPY +0.559, EURUSD -0.02249.

                Bullish factors included (1) the stronger-than-expected Apr US nonfarm payrolls which signals economic strength and is dollar supportive, and (2) weakness in the euro which fell to 2-week low against the dollar after Der Spiegel magazine reported that Greece is considering reintroducing its own currency and may stop using the euro.

                Bearish factors included (1) comments from New York Fed President Dudley who said the US recovery is still a "considerable way" from the Fed's goals, which suggest he favors keeping the Fed's overly easy monetary policy in place, and (2) the stronger-than-expected Mar German industrial production, which is euro supportive .

Tuesday, May 10, 2011...

•   The dollar index this morning is stronger with the dollar/yen +0.29 yen and the euro/dollar -0.27 cents. The dollar index yesterday fell back from a 2-1/2 week high and closed lower on speculation the ECB will continue to raise interest rates despite an escalation in European sovereign-debt concerns: Dollar Index -0.104, USDJPY -0.272, EURUSD +0.00503.

                Bearish factors included (1) strength in Mar German exports which rose more than expected to their highest level since records began in 1950 and is euro supportive, and (2) stock market strength that sapped the safe-haven demand for the dollar.

                Bullish factors included (1) early weakness in the euro after S&P cut Greece's credit rating 2 levels to B from BB- and said further reductions are possible, (2) weakness in the British pound which fell to a 2-1/2 week low against the dollar after the Confederation of British Industry lowered its economic growth estimates for the UK to 1.7% annualized from a Feb forecast of 1.8% annualized, and (3) the larger-than-expected decline in the May Euro-Zone Sentix investor confidence which fell to its lowest level in 4 months and is euro negative.

Wednesday, May 11, 2011...

•   The dollar index this morning is slightly higher with the dollar/yen +0.13 yen and the euro/dollar -0.45 cents. The dollar index yesterday fluctuated between small gains and losses throughout the day and finished slightly lower as strong equity prices reduced the safe-haven demand for the dollar while concerns over the solvency of Greece underpinned the dollar: Dollar Index -0.126, USDJPY +0.524, EURUSD +0.00441.

                Bearish factors included (1) reduced safe-haven demand for the dollar as stock prices firmed, and (2) the report from the Greek newspaper Kathimerini that the IMF is arranging a package of as much as 100 billion euros ($144 billion) to replace Greece's existing bailout, which reduced European sovereign-debt concerns.

                Bullish factors included (1) the unexpected declines in Mar French industrial and manufacturing production, which is euro negative, and (2) the view from the chief economist at Citigroup that any further lending to Greece would be futile and amou nt to "Ponzi finance" as it only buys more time until Greece must restructure its debt.

Thursday, May 12, 2011...

•   The dollar index this morning is stronger and at a 3-1/2 week high with the dollar/yen -0.13 yen and the euro/dollar -0.46 cents. The dollar index yesterday climbed to a 3-week high on increased safe-haven demand as the stock market fell on concern that European leaders are balking at providing Greece with additional aid: Dollar Index +0.716, USDJPY +0.169, EURUSD -0.02176.

                Bullish factors included (1) weakness in the euro which fell to a 3-week low against the dollar after German Chancellor Merkel said Greece needs to stay the course on its budget-cutting program to deserve an extension of the 110 billion-euro ($158 billion) bailout granted last year, which fuels concern that European leaders are hesitating in granting Greece additional aid, which may force Greece to restructure its debt, and (2) increased safe-haven demand for the dollar as the stock market fell.

                Bearish factors included (1) concern that the ECB may tighten monetary policy further after Apr German c onsumer prices were unexpectedly revised up to a gain of +2.7% y/y, a 2-1/2 year high, and (2) the larger-than-expected Mar US trade deficit which widened to its most in 9 months (-$48.2 billion) and is dollar negative.

Friday, May 13, 2011...

•   The dollar index this morning is weaker with the dollar/yen -0.26 yen and the euro/dollar +0.33 cents. The dollar index yesterday fell back from a 3-1/2 week high and closed lower after commodities and stocks rebounded from early losses, which reduced the safe-haven demand for the dollar: Dollar Index -0.087, USDJPY -0.109, EURUSD +0.00539.

                Bearish factors included (1) a rebound in commodities and stocks which shed early losses and reduced the safe-haven demand for the dollar, and (2) the recovery in the euro which bounced off of a 1-1/4 month low and finished higher on reduced Greek debt concerns after former ECB Vice President and current adviser to the Greek government, Lucas Papademos, said that Greece's exit from the EU was a "non-issue" and that the Greek asset privatization plan could ultimately exceed the announced 50 billion euros ($70.1 billion).

                Bullish factors included (1) comments from ECB Executive Board member Tumpel-Gugerell who said other co untries will be asked to help Greece as the country will need "longer" to be able to refinance itself via the markets, (2) early weakness in the euro which fell to a 1-1/4 month low against the dollar after Mar Euro-Zone industrial production unexpectedly declined.

Monday, May 16, 2011...

•   The dollar index this morning is stronger and at a 1-1/4 month high with the dollar/yen +0.10 yen and the euro/dollar -0.16 cents. The dollar index last Friday recovered from early losses and surged to a 1-1/4 month high and closed higher on increased safe-haven demand for the greenback as stock prices slid: Dollar Index +0.517, USDJPY -0.160, EURUSD -0.01290.

                Bullish factors included (1) increased safe-haven demand for the dollar after stock prices tanked, and (2) the larger-than-expected increase in May US University of Michigan consumer confidence.

                Bearish factors included (1) the stronger-than-expected Q1 Euro-Zone GDP, which is euro supportive, and (2) strength in the yen after Japanese Economy and Fiscal Policy Minister Yosano said the yen's strength was the result of the dollar weakening, not the yen gaining independently, which fueled speculation that the BOJ nor the G-7 will intervene in currency markets to slow the yen's gains.