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On Friday the yen hit a 14-year high against the dollar and it rallied broadly, while the dollar climbed against most other currencies as carry trades and risk exposure were cut down by the investors on concern about Dubai’s debt problems.

Exchange rates recovered in London

However, by mid-session in London, exchange rates had recovered some ground and they were trading in narrower ranges, whereas volatility had eased.

Fears of outright intervention

It has been said by the market sources that the Bank of Japan checked exchange rates earlier in Asian trading with Japanese commercial banks. It has raised fears of outright intervention, although it has been said by the analysts that it has less probability right now.

Dollar against Yen

Before pulling back up to 86.50 yen at 1200 GMT, the dollar dropped down as far as 84.82 yen JPY=, which is its weakest since 1995 and it is ever closer to its record low of 79.75.

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On Tuesday the euro rise against the dollar, reversing earlier losses as a firmer-than-expected German sentiment survey offset concerns about the country’s banking sector.

Rise in the German Ifo

A bigger-than-expected rise in the German Ifo November business climate index has helped the euro. The index rose to 93.9, a level that has not seen since the collapse of Lehman Brothers last year. This has lifted optimism that Germany’s recovery can gain momentum.

Euro

After falling as low as $1.4889 by 1239 GMT, the euro EUR= was up 0.1% at $1.4975. On Monday it hit a one-week high of $1.5001 but has recently struggled to hold above $1.50.

Traders cited options with a strike price of $1.5000 and $1.5050 which were set to expire later in the day.

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On Monday the euro has shown some advancement, hovering near the $1.50 level in New York trading as demand for the greenback has been hurt by the comments from a Federal Reserve official.

Greenback’s gains reversed

The remarks helped in encouraging a broad rally in global stocks, oil, gold and higher-yielding currencies that reversed the greenback’s gains from late last week.

Position of Major Currencies

In New York on Monday morning, , according to EBS via CQG the euro was at $1.4988 from $1.4851 late Friday. It has been noted that the dollar was at Y88.80 from Y89.00, whereas the euro was at Y132.97 from Y132.26. The U.K. pound was at the position of $1.6621 from $1.6491. The dollar was at CHF1.0089 from CHF1.0183.

The Dollar Index

The Dollar Index, was at 75.024 from 75.647. This index tracks the greenback against a trade-weighted basket of six currencies.

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The Canadian dollar has drooped down against 13 of its 16 most-traded counterparts and it has gained only against the currencies of New Zealand, Australia and South Africa. The U.S. dollar has shown a rise against all but two major currencies as investors’ appetite for risk waned.

Canadian currency depreciates

Yesterday in Toronto a depreciation of 1.8 percent to C$1.0706 per U.S. dollar has been recorded for the Canadian currency, from C$1.0516 on Nov. 13. This week it has fell down four straight days, which is the longest losing streak since Sept. 2, and it touched C$1.0733, which is the weakest level since Nov. 9. on Oct. 30 the currency last posted a five-day loss. The buying power of one Canadian dollar is 93.41 U.S. cents.

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As the U.K. posted its worst deficit figures since the measurement start, the pound had a negative week against the U.S. dollar.

This has decreased the attractiveness for the British currency which has performed positively in the week before.

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On Friday the dollar rise, giving an extension to the previous day’s gains as investors retreated from riskier assets, taking the shine off higher-yielding currencies such as the Australian dollar.

Tokyo’s Nikkei

Today Tokyo’s Nikkei average fell 0.5% and after the U.S. S&P 500 index suffered its worst one-day percentage fall in three weeks on Thursday, it has logged its first four-week losing streak in over a year. On Friday U.S. futures SPc1 were lower.

Banks parked funds into safe-haven assets

Investors reduced dollar short positions, and as banks parked funds into safe-haven assets such as U.S. government bonds so the greenback was also supported.

Three-month and six-month bills

On Thursday rates on short-dated U.S. government paper has dropped, with the 2-year bond yield falling to the year’s low of 0.68%. It has been said by the traders that the three-month bills traded near 1 basis point and six-month bills fell to near record lows.

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On Thursday the dollar and yen shows a rise  as a pullback in risk appetite amid falls in equity and commodity markets revived safe-haven demand for the U.S. and Japanese currencies.

The euro dropped more than 1 percent against the yen

The euro has shown a drop of more than 1 percent against the yen whereas the higher-yielding, commodity-linked Australian and New Zealand dollars tumbled as traders pared back their exposure to risk.

Analysts View

It has been said by the analysts that after recent economic data has not been as rosy as forecast the investors were turning cautious, heightening worries the sharp rally in risky assets in the past months may have been overdone.

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On Wednesday the dollar fell against most major currencies as dealers took profits on the currency’s biggest rise in three weeks, having fresh data doing little to change the view that U.S. interest rates will remain at record lows well into 2010.

Slightly higher-than-expected U.S. inflation

Two reports that has showed slightly higher-than-expected U.S. inflation and a slide in new home construction has aided to cap euro gains below $1.50.

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Against other major currencies,  US currency has shown some firmness as the investors are prompted by a fall in stock prices to flock to their perceived safety.

Dollar Recovered the losses

On Friday the dollar that weakened during early New York trading recovered the losses  during the later part of the session.

Early trading versus the single currency

In Monday’s early trading versus the single currency, the dollar has strengthened and it had climbed to a 4-day high of 1.4523. Right now 1.43 is seen as the next possible target level if the dollar rises further. Friday’s North American deals has been closed by the EUR/USD rally at 1.4582.

Dollar Rise against Pounds

During Monday’s early trading, the US currency rallied to a 4-day high of 1.6599 against the pound, as compared to 1.6679 hit late Friday in New York. On the upside, the next possible target for the cable is seen around the 1.645 level.

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On Wednesday the U.S. dollar fell, as investors moved to riskier assets like stocks and higher-yielding currencies and now it has touched new low levels for 2009 against major currencies.

Hopes for economic recovery has been supported by the rally in European and U.S. stocks, and together with the fall in U.S. dollar borrowing costs, it has encouraged investors to look for higher returns around the world.

Concerns over the dollar’s long-term status has been renewed as the world’s reserve currency and options-related euro buying also contributed to the sell-off, and that has been started on Tuesday.

Boris Schlossberg, who is a director for currency research at GFT Forex in New York has said that the dollar trade is ultimately a risk trade. What it means is that, as risk appetite improves, the dollar gets hurt. Further he said that the lower move has been initiated once a key technical barrier on euro/dollar was lifted late on Friday. Large options contracts expired and this has let the traders to push the euro through $1.45 and $1.46 is the target now. The rise in stocks and commodities are making contribution to the move.

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