The early market tone took its cue from Japan and Germany where data pointed to more confidence in recovering conditions. The Bank of Japan earlier gave a second consecutive improvement in its monthly domestic economic conditions. That lifted the yen versus the dollar to ¥96.13, while its finance minister again reiterated his country's support and faith in the U.S. dollar. A survey of German investor confidence reached its highest reading in June for three years sending the single European currency as high as $1.3933. But as market goldfish quickly forget each economic sound-bite, the latest focus is on a healthy rebound of housing starts in the U.S. , which is leading the dollar bulls higher by the nose ring. The dollar has currently strengthened to $1.3880.

In all it is a rather quiet start for currency trading, but the difference between Monday's bloodbath and today's sentiment is stark. Weakness in commodity prices yesterday was exacerbated by a rising dollar and the earnings-related pressure felt by commodity companies helped shift stocks down a gear. The more positive eastern and European sessions seem to have built some bridges on the commodity price front today and that's providing a more positive backdrop to equity prices. It would seem that everyone is a winner today.

The German ZEW index of investor confidence is seen as a predictor of economic conditions six months forward. Today its reading rallied from 31.1 in May to 44.8 for June and above market predictions. To find a better reading you'd need to look back as far as May 2006. Once again the disparity between yesterday's tone marked by the story of tough credit conditions for Germany 's biggest borrowers and that of today is very apparent. All of a sudden the sun is shining across the Eurozone, it would seem.

However, yesterday's reports of a turn in the Russian attitude towards the ascendancy of the dollar are not really any different despite the commencement of the BRIC nation summit in the Russian Urals. Market comment chooses to focus on the statement of Russian President Medvedev's comments suggesting that a dollar replacement is necessary and that nation's shouldn't trust one single currency for ever. But the context needs to be taken appropriately.

The BRICs are meeting to discuss a variety of issues and getting the groundwork laid for what might be a very long process of engineering an alternative framework has been on the agenda for at least two months. So today's comments don't spoil those of the Russian Finance Minister yesterday whereby he expressed dollar confidence. Today's reports about BRICs making currency and bond swap arrangements should not be seen as something we didn't already know about and as such are a transient factor temporarily weighing on the dollar.

The Australian central bank released its latest policy meeting minutes. The tone allowed for a slight rally in interest rate futures indicating a stronger bias towards easier monetary policy going forward. The central bank indicated that weaker inflationary pressures might allow for further official reductions in interest rates going forward. That outcome would certainly help stave off the building pressures on the currency rate as the yield cushion above the U.S. dollar is narrowed and detracting from the appeal of the Aussie as a high-yielding alternative. The Aussie surged on the back of dollar weakness in the early U.S. session to as high as 80.69 cents before paring gains to exactly 80 cents.

The British pound also ceded data-inspired gains against the dollar after the government reported that consumer prices rose during May at a 2.2% annualized pace after a 2.3% reading in April. Expectations were for a sharper slowing in price pressures to a 2% pace. The pound initially rallied to as high as $1.6508 on expectations that interest rate rises might occur sooner rather than later on the back of the data, but dollar strength later saw the pound decline to $1.6372.

The dollar index remains lower on the day, but the broad theme is that an early round of dollar selling seems to have found its match with buyers stepping back to absorb whatever sellers can throw at them.