Monday, Oct. 29th the dollar stayed under pressure ahead of the FOMC meeting. Most traders were anticipating a 25 basis points rate cut, but there was a small risk towards a 50 basis points cut. The euro posted a new high above $1.4400. Reaching record highs as well against the dollar were the Canadian dollar and the Australian dollar. These currencies, known as commodity currencies draw support mainly from the rising oil prices, the barrel hitting a record high of $93.80 earlier the same morning. Also rate

differentials incline in favour of these majors. If rates in the US continue to drop within the next year, the dollar may become a carry trades funder (situation currently seen in the yen). Investors are borrowing lower cost currencies in order to invest it in higher yielding ones.

Tuesday the Greenback continued to decline, anticipating the 0.25% rate cut the FED would deliver on Wednesday. The Sterling soared as expectations for a BOE rate cut diminished after a bank's official comments said the UK economic conditions do not require such a move yet. At the end of the New York session the dollar was trading at $1.4425 against the common currency and $2.0660 for a British pound. The dollar fell below 1.1600 against the Swiss franc, and was buying 114.70 yens.

Altough greatly anticipated and already priced in by the market, the FOMC 0.25% rate cut adjustment on Wednesday did not relief pressure on the dollar. The Greenback posted new lows against four major currencies: the euro, Sterling, Canadian dollar and Australian dollar. The FED's decision was motivated by repercussions from the credit market. Inflation is still a concern for the bank's committee, and that diminishes the chances for a new cut in December.

Same day in Europe, inflation reports gave hope for a new rate hike on behalf of the ECB in December. Dissapointing new came from Japan too, BOJ leaving the benchmark interest rate at 0.5%. The rate is likely to stay in place until next year. The yen was among the very few currencies that did not post significant gains after the FED's announcement on Oct. 31st. The Japanese currency continues to fund carry trades, a strategy used by investors to take advantage by rate differentials between Japan and other major economies.

Thursday the dollar came off record lows touched the day before, and was trading at $1.4480 for a euro and $2.0770 against the Sterling pound. It lost ground against the yen, trading at 114.60. In economic news the ISM index came below expectations, at 50.9% in October, affected by poor performance in housing and credit markets. Weekly jobless claims were reported higher than anticipated.

Friday the dollar slipped to new lows against the euro, hitting $1.4527. The British currency was buying $2.0888. Only the yen was weaker against the Greenback at 114.90. Friday's dollar drop was in contradiction with the Non-farm payrolls reports, that showed 166,000 were created in October, the best figure in the last 5 months. U.S. factory goods orders increased as well by 0.2% in September.

For the coming week, we foresee a correction for the major dollar pairs. Friday's data is dollar positive yet the market chose to interpret it as an increase in risk appetite. Bank of England and the European Central Bank are expected to leave rates unchanged at their Nov. 8 meeting. However positive comments following the decisions might put pressure on the dollar if rate increases are signaled by year end.