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USD

The US dollar Index pulled carried off its largest gain since early September to pull away from a 14 month low on Monday, as safe-haven flows into the US dollar resumed amidst Japanese debt uncertainty.

Forex Analysts speculate that the early week rally will be short lived as Investor Confidence, and Housing Start data are to be released on Tuesday and the all important GDP later in the week on Thursday.

It is expected that the US will expand 3.3% in the third quarter, taking the US firmly out of recession, however anything less than this could cause a further deterioration in the Dollar.

At 1:00AM GMT, the US Dollar was trading up 1.01% to the Euro to 1.4854, up .14% to the Japanese Yen to 92.17, up .09% to the British Pound Sterling to 1.6299, up 1.32% to the Canadian Dollar to 1.0679, up .92% to the Australian Dollar to .9138 and up 1.04% to the Swiss Franc to 1.019.

China in Focus

The People’s Bank of China released a report that advises the Chinese Central Bank to increase the reserve holdings of the Yen and Euro.

The report clearly states that the US Dollar should remain the center piece of the reserves, as divesting now could further deteriorate and already weakened Dollar, however a greater share of China’s 2.27 Trillion Dollar reserves should go towards “other major global players.”

The Chinese are weary of the Dollar but understand that for now it is the standard in reserve currencies, specifically because it has been the primary for so long and a mass flow of USD’s out of the reserve system could help to destabilize the currency.

However, the recent calls for a broader system have served to slowly integrate a wider variety of currencies at the expense of the Dollar.