Did demand for the dollar just suddenly drop to the wayside as the summer officially ended or did investors simultaneously desert the sinking ship? Either way, the dollar index, which tracks the greenback's value versus a basket of currencies of its most commonly traded partners, fell right through its early August low point achieved when risk appetite was last served up to entice investors. Upgrades for several key U.S. companies and industries are lifting equity prices, provoking more recovery discussion and reminding investors on the near anniversary of the failure of Lehman Brothers Holdings that if the worst is past, then better times are surely ahead.

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During the past couple of weeks, something has been brewing in the gold market as its price has moved ever-higher regardless of the direction of the dollar. Typically investors have bought gold for its safe haven qualities during times of uncertainty. The groundswell in optimism over the prospects for the price of gold have coincided with suspicions of better prospects for global industrial activity as predicted earlier by analysts at Goldman Sachs.

As the dollar slumped to $1.45 versus the euro currency today, it was becoming apparent that metals prices around the world were starting to rise and included gains for copper, lead, nickel as well as the price of crude oil. The house of JPMorgan also lifted the prospects for shares at industrial conglomerate, General Electric whose share price has surged 5% this morning. In both cases (industrial activity and prospects for GE) investors have clearly returned to work today with a clean slate and are prepared to take a fresh look at the world's economic prospects for 2009 and into next year. The pessimism marked by weakness in Asian markets over recent days has clearly been tossed into the trash can.

The one piece of the jigsaw that is missing today is the typical rise in bond yields. The 10-year U.S. note yield at 3.4% is hardly any distance from last Monday's 3.3% when stocks slid 2% to begin a week of worries about the economy. Although there is no need to raise interest rates especially given an ongoing rise in the rate of unemployment, the step up in risk appetite usually detracts from funds flow to the bond markets and acts to sober-up a yield curve that's become too flat-footed. With notes unchanged today, fixed-income investors are not taking much notice of the rally for stocks.

Today, earnings are back in focus, economic activity is back in focus and risk aversion has been assigned to a seat in the stands after gracefully bowing off the field. Investors seem to no longer need the sanctity of the dollar a year on from the failure of Lehman Brothers.

British industrial and manufacturing activity both rose during July serving to increase optimism in a recently beaten down British pound. It rose to $1.6555 today despite less rosy news from the British Retailers Consortium who said that retail sales fell on a quarterly basis on the back of ongoing subdued signs from consumers.

In Germany the industrial data was actually worse than expected. Investors keen to see a resurgence of industrial output in July of as much as 1.6% were disappointed by a 0.9% decline. Still, the overall negative tone to the dollar allowed for the euro to rally and lifted it to ¥133.79 against the Japanese yen.

The dollar also fell against the yen to ¥92.19. An industry group noted that August bankruptcies in Japan declined for the first time in three months, possibly boosting the outlook for the Japanese recovery. During the last week the rate charged by cash lenders to borrowers of short-dated loans fell to the lowest among the G7 nations. The three-month U.S. dollar Libor interbank borrowing rate fell to 0.3% undercutting the rate on the Swiss franc for the first time since last November.

Both Australian and Canadian dollars were off to the races this morning. The Aussie dollar was most obviously in the saddle perhaps given its yield advantage and arguably the greater likelihood that its central bank would not hesitate to raise short-term interest rates before other nations do. The Aussie unit rose to 86.54 U.S. cents this morning. It benefits from rising raw material prices and increasing optimism for industrial activity. The Canadian dollar also rose to buy 93.22 U.S. cents on the back of increased demand for base metals and crude oil.

There are still question-marks over economic prospects ahead. Most notably is what independent lead consumers might take to shape the recovery. So far it's been the indirect actions from governments' stimulus that has prodded consumption to respond. At some point, this weaning process needs to come to an end.