USD - Significant data releases and a holiday-thinned market last week conspired to create heightened volatility for currency markets, and in particular, the US dollar. A series of sanguine economic data sparked investor risk appetite, causing the greenback to lose ground leading up to the Thanksgiving holiday: Consumer Confidence (49.5 in Nov. vs. 47.3 exp.); Initial Jobless Claims (466K for 11/21 vs. 501K prior); U. of Michigan Confidence (67.4 in Nov. vs. 66.0 prior); Q3 GDP (2.8% vs. 2.8% exp.). However, disappointing Durable Goods Orders (-0.6% in Oct. vs. 2.0% prior), together with the shocking news out of the United Arab Emirates concerning Dubai World's request for an extension to repay loans of up to $60B, roiled markets resulting in a flight-to-quality response to the USD. Financial markets are returning to some semblance of normalcy this morning as trading volume has increased and the debacle with Dubai World has ostensibly been resolved (a standing agreement with creditors to extend loan maturities until at least May 30, 2010). Consequently, the USD has once again become a favored currency for the carry trade in which investors borrow in the low-yielding USD to fund its investments in other higher yielding assets and currencies. This morning's better-than-expected Chicago PMI release (56.1 in Nov. vs. 53.0 exp.) further exacerbated the dollar's precipitous decline, causing it to drop to multi-week lows vis-à-vis the EUR, GBP, CHF, AUD, and NZD. Markets will be closely attuned to this Friday's NFP report and Unemployment Rate announcement. With US equities still hovering near the highs of the year (DJIA at 10,310.00), Gold trending everhigher ($1173/oz), and US interest rates remaining at historic lows, the USD will likely continue to remain under pressure into the foreseeable future.

EUR - The euro is stabilizing as risk aversion surrounding a potential debt default by Dubai eases. Although last week's gains came as US markets were away for Thanksgiving, potentially exaggerating moves, the euro's climb back above $1.50 today highlights the underlying fundamentals of the currency. Sentiment remains fragile as investors remain cautiously optimistic and await further news on the Dubai situation. Given this, volatility in the euro will likely continue as risk takes the spotlight.

GBP - Revised GDP figures from the ONS confirmed that the UK was indeed in a recession in Q3. Although growth was revised up by 0.1% for both q/q and y/y, the figures were still unquestionably bleak: GDP fell by 0.3% q/q (-5.1% y/y). Financial woes at Dubai World, may prove problematic for the financial sector in the UK and possibly also for the UK housing market, as UK banks are reported to have lent large sums to the company. This week sees the publication of mortgage approvals, the Nationwide and Halifax house price indices, and PMIs for the manufacturing, construction and service sectors. The GBP fell around 1% against the EUR last week, and the near-term outlook is not particularly encouraging either. The BoE is continuing its quantitative easing, and vast idle capacity means that it will not be in any hurry to up interest rates.

JPY - The yen followed suit with the USD as a safe-haven/carry-trade currency by tracking a 4.6% range for the week. Japan's currency saw a high of only 89.17, remaining below the psychological barrier 90.00, and a low of 84.84-its strongest since July 1995. Japanese bonds rose on speculation that the government's concern about deflation will spur the BoJ to step-up debt purchases and bring down yields. Demand for debt increased after Finance Minister Hirohisa Fujii said today monetary policy plays a key role in fighting falling prices, echoing Deputy Prime Minister Naoto Kan's comments. Some analysts are predicting the yen may fall toward 80 yen by the end of the year on concern the US recovery will falter and its budget deficit will widen.

CAD - The loonie was once again whipsawed by risk appetite and risk aversion last week. The markets flowed characteristically in and out of risk over the course of last week's session and the CAD was in lock-step with them tracing a 5.2% range from a high of 1.0707 last Monday to a mid-week low of 1.0452 before shooting back up to close the week at 1.0737. Crude oil saw much the same fortunes ranging almost 9% from $79.81 a barrel to a session low of $72.81 again holding the correlation with CAD. Natural gas was fairly stable until Friday's post holiday session when it gained 20% from $4.366 to $5.27. Continued economic stimulus from the Canadian government came last week in the form of C$495M ($469M) of mortgages it purchased from banks, less than the C$4B it had offered, as part of a program to encourage new lending. This was followed by news that Canadian home prices posted their fifth consecutive monthly increase in September rising in five of six cities.

MXN - The peso experienced virtually the same market volatility as its northern most trading partner, Canada, posting a range of over 4%. Friday's rally came on the heels of Fitch Ratings cutting the country's credit rating one level to BBB-the second lowest investment grade-and changed the outlook to stable, a move investors had been anticipating for months. S & P, which has had Mexico's BBB+ rating on negative outlook since May, hasn't announced a decision yet. The gain shows some investors were awaiting the downgrade to take positions in Mexico. Q3'09 GDP rose 4.6% q/q showing pickups in manufacturing and increased commodity profits. Mexican Central Bank Governor Guillermo Ortiz announced his assessment last week that the Mexican economy will contract 7% in 2010.

CNY - The yuan strengthened modestly vs. the dollar at 6.8271. Chinese Premier Wen Jiabao commented that demands for the yuan to rise were unfair and that China would keep CNY stable at a joint EU-China summit underway this week.