The greenback became the beneficiary of the latest bout of risk aversion in overnight trade. Higher yielding currencies continued to get pummelled overnight as news resonated through the market that the republic of China has taken steps to reduce lending for some banks. This came a week after China unexpectedly increased the amount of deposit reserves required by banks, in an effort to reduce the risk of inflation and the likelihood of an asset bubble developing. The central bank announced requirements will increase by 50 basis points from the existing level of 15.5 per cent starting on January 18. 

Sterling was given a leg up as the latest jobs data showed the biggest drop in jobless claims since April 2007, but it proved to be little concession to US dollar strength. Claims for unemployment benefits dropped 15,200 for the month of December, outstripping the expected decline of 3,300 - A revision for the month of November also showed a steep drop of 10,800 from the original print of 6,300.

US producer price index which is an indicator of commodity inflation, made a slight improvement for the month of December rising 0.2 per cent, representing annual growth 4.4 per cent, but still slightly off estimates of 4.5 per cent. US Housing starts fell 4.0 per cent in the month of December to a seasonally adjusted annual rate of 557,000.

Locally, the move by China saw Commodities take a hit with the contagion spreading to the Aussie dollar which has slid to lows of 90.7 US cents and remains under pressure at current level of 91 US Cents.

Yesterday saw The Westpac Consumer Confidence index rise 5.6 per cent for the month of January, against a decline of 3.8 per cent in December. In a press release Westpac's Chief Economist, Bill Evans, pointed out the positivity of the latest result, considering three consecutive interest rate hikes in the latter part of 2009. Mr Evans also suggested a surprise surge in newly created jobs may have also buoyed consumer confidence. The Australian economy added 35,200 new jobs in the month of September, reducing the official unemployment rate to 5.5 per cent - well in advance of economist predictions of 10,000 new jobs created.