The US dollar rally seen yesterday and overnight came to an end as European shares rose and US stock market futures dampened the dollar sentiment. The dollar weakening against a basket of currencies was capped after data showed China’s exports in February slid 25.7% from a year earlier, while imports dropped 24.1%. These import and export figures from what is considered an economic powerhouse was a timely reminder on the sickly state of global economic growth, or lack there of.

Recently, news from banks has been one of the factors in guiding investors to shy-away or whet their appetite for riskier assets which push or pull the equity markets. As equity markets perform somewhat better, global risk aversion bid for the dollar may ebb.

The euro strengthened against the dollar touching a two week high overnight, but erased some of those gains after German industry orders fell for the 5th straight month. German manufacturing orders slumped by 8% in January signaling Europe’s largest economy may again contract sharply in the first quarter of 2009.

The British pound strengthened against the dollar overnight but most of the gains disappeared in early morning trade. Meanwhile the pound remained near multi-week lows against the euro due to concerns over the UK economy and banking system. Data from the National Institute of Economic and Social Research indicated Britain’s economy had shrunk by 1.8% in the three months to February, after falling 1.7% in January. Furthermore, Britain’s goods trade gap widened more than expected in January to 7.745 billion pounds from 7.232 billion pounds in December.

The Bank of England will implement its first “quantitative easing” program today by purchasing 2 billion pounds of government bonds. Market players are waiting on signs of the impact of BoE’s last ditch attempt to beat off recession by leveling close to 75 billion pounds into the economy. Many are speculating the pound to remain under pressure.

The Japanese yen remains little changed against the dollar. Many analysts had forecasted the yen to strengthen in the next six months but revised their outlook after Japan’s economy contracted last quarter by the most in three decades. Since December, the yen has weakened 8.2% against the dollar. With the erosion of Japan’s economy, some investors are beginning to question whether the yen deserves the “safe-haven” status.

The Canadian dollar weakened slightly against the US dollar as oil prices dropped. Oil fell below $44 a barrel as evidence for global crude demand declined.

The Australian and New Zealand dollar strengthened against the greenback after initially weakening against the US dollar. As China’s exports took a surprising slump, both the Aussie and the kiwi weakened against the greenback. However, those losses were recouped as US stocks rallied.

Indicative rates:

EUR/USD 1.2801

USD/JPY 97.80

GBP/USD 1.3807

USD/CAD 1.2764

USD/MXN 15.1840

USD/CHF 1.1543

AUD/USD 0.6550

NZD/USD 0.5107

USD/DKK 5.8306

USD/SEK 8.7900

USD/NOK 6.9144

USD/TWD 34.375

USD/CNY 6.8359

10-Year Treasury Note Yield: 3.019%

Dow Jones Industrial Average: 6,967.43 + 39.83