USD– Most major currencies are under significant pressure today as a measure of risk aversion reestablished itself in early trading. Global equities are down significantly with Asia and Europe beginning the week giving back the gains of the previous five days. Last week Treasury Secretary Geithner revealed more about the Obama administration’s plan to restore financial stability. The Plan: the Public-Private Investment Program (PPIP), which aims to get toxic assets and bad real estate loans off the balance sheets of banks and other financial institutions. The PPIP is divided into a number of parts but the common denominator for the design of the various investment funds is that the government takes the greatest risk. The idea is that the government and private investors inject equal amounts of capital into the funds, and the government then leverages this capital by issuing non-recourse loans secured against the fund’s assets. Last week, robust housing data (Existing Home Sales: 4.72M in Feb.; New Home Sales: 337K in Feb.) and a better-than-expected Durable Goods Orders Index helped to cheer markets, causing a flight towards risk, weakening the USD. This week brings two of the most important economic releases in the US: the ISM survey and the employment report for March. The markets will also turn their attention to the upcoming G20 summit this Thursday, which together with the highly anticipated NFP data release on Friday, should help fuel volatility again this week in the financial markets.

EUR – In a dramatic reversal to the prior week’s gains, the euro suffered one of its largest drops in 2 months last week on concerns over mounting deficits in the E-16. The single currency fell from highs at 1.3735 to lows today at 1.3115 as heightened risk aversion extended the euro’s losses. German Finance Minster Peer Steinbruck sent the euro into a tailspin Friday after he expressed concerns that growing deficits could undermine the euro’s stability and credibility. Markets are looking forward to the ECB meeting on Thursday at which the Central Bank is expected to cut interest rates by 0.50%, bringing benchmark rates to 1%. Given the fiscal concerns weighing on the Eurozone and this week’s pending G20 meeting, euro gains are likely to moderate in the near term.

JPY – Bolstered by fears of bankruptcy for US automaker giants GM and Chrysler and a grim start for global equity markets, the yen opened the week significantly stronger as investors once again looked to cut risk exposure and seek safety in the Japanese currency. The yen continued to build on the momentum from late last week sparked by last-minute fund repatriation by Japanese investors ahead of the annual book-closing on March 31 and the expectation for further flows into the country due to a change in an important tax regulation. However, most of last week was met with grim economic data out of Japan: Industrial output (-9.4% in Feb. vs. -10.2% prior). Overall, Japan’s export-reliant economy has contracted 3.2% in Q4’08. Furthermore, the BoJ’s governor said corporate credit conditions remain constricted, and he urged banks to strengthen their capital positions. The government has already extended $5.2 billion in loans from its reserves to the Japan Bank for International Cooperation (JBIC)—a state-backed trade financier to support the economy during the crisis. Analysts expect Japan’s economy to continue shrinking in H1’09, making for a record five consecutive quarters of contraction.

GBP – Sterling was not immune to the risk-averse retreat to safe-have USD. The pound gave up 3.5% last week to the dollar as investors returned to the dollar amid global sell-offs. The pound may keep strengthening against the euro, according to UBS AG, the world’s second-biggest currency trader. “There appears to be no change in the Bank of England’s outlook on its asset-purchase program in the short term and we continue to see sterling recover from oversold levels, especially against the euro”. U.K. Prime Minister Gordon will call on the international community and “ask the G-20 for $100 billion to help revive trade. The $100 billion proposal, a measure aimed at making up for a lack of bank lending, is the minimum needed according to Brown.

CAD – The loonie, along with all the other majors, saw a drop-off last week vs. the USD. The Canadian currency gave back 2.7%, last week, of its previous week’s gains on increasing global risk-aversion. Equity, bond and commodity markets are currently reflecting the return to safe-haven USD. Crude oil & natural gas also followed suit (Crude oil dropped 7% to a current low $50.29 & nat. gas saw a 16% move down to $3.72-GJ). Last week began on a very positive note for CAD with Canada’s dollar trading near a five-week high as commodities and stocks rose, signaling increased investor appetite for risk. This was followed by a reversal at week’s end with Canada’s dollar falling to its lowest level in a week as declines in tocks and commodities signaled diminishing investor appetite for risk.

MXN – The Peso faired better amidst last week’s sell-off vs. USD giving up a little over 1.7% vs. the greenback. Mexico’s credit rating could be hurt by a defeat for President Felipe Calderon’s National Action Party in mid-term congressional elections, said Mauro Leos, a sovereign analyst at Moody’s Investors Service. A loss of seats for Calderon’s party in the July elections would hamper his ability to push through legislation needed to boost tax revenue and stem a decline in oil production, Leos said. Unemployment in Mexico rose to 5.30% nationwide, up from 5% in January and December’s 4.32% reading. Expect Peso to continue taking its que from Emerging Market investment.

CNY – The Chinese yuan is slightly lower at 6.8366 on heightened risk aversion. Markets are pricing in a modest 0.4% yuan depreciation over the next 12-ms. given the global economic slowdown.