Yesterday, the U.S. dollar fell against a basket of currencies, weakening to a 2-week low against the euro on speculation that the banking crisis may be easing. The Australian and New Zealand dollars both appreciated, with the kiwi rising to a 2-week high against the greenback after the Reserve Bank of New Zealand lowered its over-night lending rate by 50bps to a record low of 3%. Statements from New Zealand central bank Governor Alan Bollard signaling that interest rate easing will be much smaller going forward provided further support for the currency. This morning the dollar is stronger against most currencies on renewed fear of a deepening global recession. The euro declined against the U.S. dollar after German Industrial production decreased for a fifth consecutive month, fueling speculation of further interest rate cuts by the European Central Bank. The British pound continues to struggle against the U.S. dollar as concerns over the U.K. banking system and uncertainty over the effect of the Bank of England's quantitative easing program continue to weigh on the currency. The Australian and New Zealand dollars pared gains against the U.S. dollar as weakening equity markets and poor Australian employment data reduced demand for the higher-yielding currencies. Major economic releases today include U.S. Retail Sales and U.S. Jobless Claims.

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