The US dollar is weaker against a basket of currencies as global stocks rally and Wall Street is set to open higher later this morning. World Bank President Robert Zoellick said the dollar will remain the world’s dominant reserve currency and in order to lift the world out of its current critical economic and financial crisis, the dollar must remain strong. He further announced a $50 billion program to reverse a sharp drop in trade and urged G20 leaders to back the effort.

World leaders travel to this week’s G20 crisis summit, with bleak economic outlooks in the forefront of many. The Organisation for Economic Co-Operation and Development (OECD) forecasted the world economy would shrink faster than originally anticipated, sending unemployment soaring and underscoring the need for extra steps to halt the crisis.

The euro initially weakened against the dollar overnight after the Eurozone inflation plunged to an all-time low in March but erased some of those losses after data showed home prices in the US dropped a record 19% in January from a year earlier, suggesting housing remains in a deep recession. Data from Eurostat indicated that inflation in the 16 countries using the euro hit a record low and fell to 0.6% year-on-year in March. This data strengthens the case for the European Central Bank to cut its interest rates by 50 basis points at the meeting this Thursday.

The British pound pared some gains against the dollar after better than expected consumer confidence data. The Gfk/NOK consumer confidence barometer rose to -30 in March as lower mortgage repayments boosted disposable income.

The Japanese yen weakened against the dollar as the Japanese fiscal year came to an end and poor economic data spurred investors to take their funds abroad. Data showed Japanese unemployment hit a seasonally-adjusted 4.4% in February, and household spending slid 3.5% in February from a year earlier. Prime Minister Taro Aso pledged to submit an extra budget to fund a new stimulus package which would be the third since the economic downturn, aimed to create 2 million jobs over three years. Watch the yen to remain under pressure as investors’ appetite for risk whet.

The Canadian dollar strengthened against the US dollar, backed by stronger oil prices and equity markets. Canada is a major exporter of oil, and benefits when the price of oil strengthens.

The Australian and New Zealand dollar recouped its losses against the US dollar as investors’ appetite for risk was brought back to the forefront. The Aussie rally was boosted from Japanese investors buying ahead of the month-end, while the Kiwi rally came from investors’ cautious return to carry trade. However, the recent rally may soon be halted as analysts anticipate the Reserve Bank of Australia and the Reserve Bank of New Zealand cutting rates by 25 basis points at their next meeting.

Indicative rates:

EUR/USD 1.3372

USD/JPY 97.92

GBP/USD 1.4373

USD/CAD 1.2548

USD/MXN 14.0570

USD/CHF 1.1330

AUD/USD 0.6988

NZD/USD 0.5760

USD/DKK 5.5905

USD/SEK 8.2105

USD/NOK 6.7013

USD/TWD 33.840

USD/CNY 6.8279

10-Year Treasury Note Yield: 2.694%

Dow Jones Industrial Average: 7,590.12 + 68.10