Overall: The currency market began buying dollars just before the London open. Moreover, dollar strength continued during the European session despite the positive overnight markets, which should have helped the majors advanced against the greenback. Meanwhile, the Fed got its wish (which is to weaken the dollar and therefore boost equity markets) after announcing it would purchase up to $300 of longer-term U.S. debt over the next six months in its statement following the meeting. The dollar plunged against everything after the announcement as the market became even more convinced the Fed will do everything it can to debase the currency.

See the Dollar Index for more on the FOMC.

The Euro (Eur/Usd) gained suddenly early in N.Y. even as stock futures declined, but the reason may of had more to do with the CHF than anything else. It's obvious that certain parties may not be happy with the Swiss National Bank's (SNB) move to weaken the Swiss franc (CHF) last week. Either that, or speculators have decided to take the SNB on in a battle of wills.

The reason the SNB needs to weaken the CHF has to do with the exposure of Swiss banks to Eastern European borrowing. Residents in those areas took their mortgages in CHF and Euros, primarily because the cost to borrow was cheaper in those currencies. That left those borrowers exposed to an exchange rate risk if the value of their home currencies fell, which they did as the global economic crisis spread.

As many as 80% of Polish mortgages are held in CHF. As a borrower in Poland saw their home currency depreciate against it (-48% between October and March), the cost of paying back the mortgage naturally rose.

It also left Swiss Banks exposed to the possibility that default rates on those loans would rise as borrowers became unable to pay the higher costs associated with their own currency's depreciation. Banks can hedge their exposure, but it's expensive and difficult to do so. And, it doesn't always work.

The CHF remained a safe haven during the global financial crisis. The CHF rose from 1.2296 to as high as 1.0412 (15.3%) on the dollar between November and December 2008. Those who fled to the franc are now seeing the value of that holding decline as the SNB devalues the currency, so they may be fighting back. The Swiss franc rose strongly on the dollar this morning.

The battle of over the CHF cross rate was also reflected in the euro on Wednesday, as the single currency gained on the dollar even as stocks and oil declined.

The Pound (Gbp/Usd) traded in a tight, 40-pip range during the Asian session, but eventually the pair broke lower during the European session. Shortly before the London open, the pound plunged 140 pips, ahead of the employment data. As with everything else sterling gained strongly on the dollar after the FOMC, hitting a peak on 1.4283 from 1.3970.

The unemployment rate increased again in the U.K. in the latest three months to January 2008, to the highest rate seen in the last decade. The annual rate of growth in average earnings including bonuses was 1.8% in the three months to January 2009. The number of people seeking unemployment increased again in February, to the highest value in the last 12 years. The report shows there were 1.39 million persons on the claimant count in February, and up by 138,400 from one month earlier

The BoE’s minutes from the meeting held at the beginning of March shows that the committee had voted unanimously to reduce the Bank Rate by 50 basis points. Additionally, the Committee also voted unanimously that the BoE should use up to 75 billion pounds over the next three months to buy corporate debt and U.K. gilts.

The Aussie (Aud/Usd) has traded with very weak momentum in the last two day of trading, as the pair remained trapped between the 50 and the 100-day simple moving averages. During the Asian session, the aussie traded between the high of the last day of trading and the neutral pivot point (0.6605), but the support level gave way during the London open. The aussie went from .6600 to a peak on .6802 before retreating slightly.

The Australian MI leading index came in at a -0.2 percent month over month after a -0.4 percent decline was seen on the previous figures reading. This has raised speculation that the nation is expecting to enter its first recession since 1991. The economy shrank 0.5 percent in the fourth quarter of 2008. This was the first contraction seen in eight years as consumers limited spending and exports slowed.

The Cad (Usd/Cad) struggled again to break below the 1.2680 support level during the overnight session. A similar pattern was seen in the last day of trading, when the cad could not muster enough momentum to break the support level. On the upside, the pair struggled with the 20-day simple moving average during the overnight session. After the FOMC, the pair plunged over 200 pips.

The Swissy (Usd/Chf) managed to break below the low of the last two days of trading, but the pair traded side-ways overall. In the last three days of trading the swissy has consolidated, as the SNB threatened to intervene in the currency market. See the euro summary above for an explanation of today's movement.

Swiss retail rose more than expected in January, compared with one year ago. Over the last few months, retail sales had risen strongly, but it seems this trend will reverse, in-line with the fatigue seen in the economy.

The Yen (Usd/Yen) fell to TheLFB S1 (98.25) during the Asian session, ahead of the BoJ statement, but then recovered every lost pip during the rest of the overnight session. Currently, the pair trades close to the 99.00 resistance area, where it had also topped the previous day. The pair plunged after the FOMC, finding support at 95.66, exactly where support was also found on March 12.

The Bank of Japan decided by a unanimous vote to maintain the Overnight Call Rate at 0.10%. Having the lowest rate amid industrialized countries, economists argued that the low interest rate will not provide strong enough relief to the Japanese economy, and that the central bank has mostly depleted its powers to influence the business cycle by using monetary policy.