Currencies
The dollar rose against the euro for a second weekly gain after stronger than expected reports on factory orders and manufacturing suggested things could be stabilizing in the United States. The dollar climbed after it had fallen as far as $0.92 earlier on anticipation the reports would show the U.S. economy remains weak. As the U.S. economy shows signs of picking up, Europe's economy continued to sag, especially after data showed that French July jobless ranks grew at the fastest pace in more than five years while Italian and Spanish factories cut prices.

The yen rose against all other major currencies on speculation Japanese banks and other investors are pulling back funds from abroad to cover investment losses at home, where the Nikkei 225 stock index continues to tumble. Under new accounting rules, Japanese companies must value their investments at market prices as of the end of their fiscal half year on Sept 30, adding to pressure to pull money home from abroad. The yen's gains may be limited by expectations the Japanese government will intervene to protect exporters' overseas earnings. There are growing signs of frustration from Japan over the strength of the yen. This is understandable. The contrast between the strength of the yen and the weakness of economic data was particularly pronounced last week.

But many traders say a more important factor is risk aversion among Japanese investors, who are reluctant to invest overseas and are instead fueling a repatriation of overseas assets. One point of interest for foreign exchange traders is that the escalation of official rhetoric against the rising yen has had only a minimal effect. There is a sense that government officials are seeing diminishing returns on their rhetoric.

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