In yesterday's opening commentary we questioned whether investors needed to get some “dollar-bashing out of its system” following a sharper than expected rebound in the Philly Fed gauge of manufacturing prospects – a widely followed indicator of future activity. At the time, the euro just put in its high for the day at $1.40 and we were impressed with the claw back the dollar made later in the session to finish at under $1.39. Our central observation here as the week winds down is that the value of the dollar is holding very steady as economic improvements keep landing on the doormat.

As we write, the dollar index is still higher on the week and as we assess the chart, only on Wednesday did the index close lower than last Friday. That's quite an achievement when you consider how bearish interest rate expectations were ditched over the course of the last 10 days. What we're saying is that dollar strength is often supported by prospects for rising yields. However, during the week the tone has certainly been one of less fear surrounding a Fed rate hike, with one article predicting how the Fed might use next week's FOMC statement to dash any hopes for a tightening across the horizon.

The euro closed at $1.4016 last Friday and at $1.3912 as we write. Rising crude oil prices, which continue to point to strengthening global demand, are not undermining the dollar as they might have in the past. Crude oil prices look set to remain above $70 per barrel for the week. But as we turn to the euro/yen relationship it's making us question the health of the euro overall. It would appear that the health of Germany 's banking system is weighing heavily against the desire to switch dollars for euros.

The Japanese yen has been sold throughout the week as investors bought equities and more were inspired to reinstate the carry trade. Yen was sold short and assets in bonds and stocks abroad were purchased to benefit from still high spreads. But last Friday the euro bought ¥137.94 at the close, while today it buys ¥134.80 for a weekly decline so far of 2.3%. Should we therefore conclude that while investors are selling yen, they are choosing to overlook Eurozone assets?

Earlier today a meeting of EU leaders in Brussels was set to deliver a closing statement, before a news organization became familiar with its contents. According to the verbiage leaders feel that the development of economic conditions no longer warrant further budgetary stimulus. Rather, say the leaders of an economic area set to contract at 3.7% this year, attention should shift towards consolidation with economic recovery. “There is a clear need for a reliable and credible exit strategy,” said the sage leaders – apparently.

All we can offer as we reflect on the approach of the anniversary of the last ECB tightening of monetary policy as how such optimism smacks of premature optimism in 1937. Yet still, what surprises us this morning is the fact that the hawkish EU stance has not really come to the aid of the euro. Once again we feel compelled to note that something very subtle is starting to weave its way into the way investors are willing to treat the currency.

Take the British pound this morning, which faced a similarly rousing stance from British central bank chief, Mervyn King. Typically demure and known for his grave take on the whole financial crisis, he sounded remarkably upbeat in an interview with a largely unknown British newspaper as he visited the port of Southampton . At least the reported comments have been taken to be bullish by traders snapping up pounds for dollars at $1.64 today. Mr. King noted that the previously contracting downturn might finally be flattening out. That's as bullish a statement as you want to make it and we can't really see the fuss over his view that slowdown might be ebbing in so far as this is already known. Perhaps the sight of a smiling Mr. King for a change was enough to bolster the pound. We await pictures from the Southern Daily Echo.

Just to highlight the peculiar end to the week we note the divergent fortunes for the Aussie dollar and its Canadian counterpart. Canada 's dollar is usually a good bet when crude rises but today we find it languishing at 88 U.S. cents while the Aussie has poked its head back to 80.47 and it almost looks safe to stay above 80 cents by the close. Once again we note that the Aussie is lower for the week having closed at 81.24 cents this time last week.