Investors chose to be 'shocked' by Friday's larger-than-expected rise in American workers laid off from jobs. Some 263,000 more workers were fired throughout September raising the rate of national unemployment to 9.8%. A rather nervous equity market was poised to react further to the downside, but as nerves settle in the aftermath it's beginning to feel as though the panic has been somewhat magnified of late. Some may have feared that the next leg of the recession was just around the corner all along. Others seem to have facial smirk that says, See. I told you the stimulus would run out of steam. Curiously, the dollar is down on prospects for a longer monetary policy vacation, while risk aversion doesn't necessarily feel as though it is running the roost today.

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The dollar index is 0.4% lower today with much of the loss attributable to a strengthening in the Japanese yen. The dollar is weaker at $1.4623 to the euro, which has added 0.6% today. The dollar is making some ground against the pound at $1.59 after a marginal downward revision to an earlier reported rise for British home prices. The pound is struggling in the face of weakness in equity markets, but one wonders how investors will react as American equities roll back earlier losses.

The yen has rallied against the dollar and is trading at ¥89.10. Against the euro it has managed to roll towards a three-month high before easing to stand at ¥130.26. The yen's behavior is curious. It rose sharply against the dollar perhaps on a risk-aversion view in the aftermath of the U.S. data.

However, it is the dollar that has supposedly become the new victim of the carry-trade since funding costs are least in dollar terms. So today's risk-reduction in which investors suddenly quit higher yield investments and scramble to get out of short positions in their chosen funding vehicles is apparently benefiting the yen, given the dollar is lower. We think that this is partially explained by the view that the Fed is on hold indefinitely, which undermines the dollar, but can you see our point that risk-aversion doesn't feel as justified as some might be claiming?

There doesn't seem to be a tremendous amount of fear showing up in the commodity market. The price of gold is higher holding above $1,000 per ounce on account of a lower dollar. But we note that the price of crude oil is only marginally lower, has not lost its earlier in the week gains to back above $70 and seems to be telling us that it is less worried by a decline in U.S consumption.

It's true that today's employment report was less than what many had hoped for, but it's a far cry from the view that the world has been turned upside down. Witness the surge in the value of the Australian dollar, which appears to be eroding all of Thursday's downside along with the weakness it suffered on the report. It's now back at 87.00 U.S. cents. The Canadian dollar is back to 92.60 cents as if nothing ever happened today.