Currencies
Currency markets remained in a state of suspended animation with U.S. equities markets closed. Support for the dollar came as the Group of Seven said it was prepared to help prevent Tuesday's terrorist attacks from worsening the global economic slowdown. Finance ministers and central bank governors from G-7 said that they would monitor economic developments and financial markets closely, and stood ready to take further action as necessary. The graph below shows that the dollar weakened especially on Friday as the markets braced themselves for Monday's re-opening of trading in the United States. Central banks in the United States, Europe and Japan pumped billions into the money market to support the normal functioning of the markets.

The dollar fell against the euro Tuesday on concern that the attacks against the World Trade Center in New York and the Pentagon in Washington would hurt the U.S. financial system, leaving companies without the funds they need for business. The potential damage done to consumer confidence and economic growth also weighed on the currency. Other analysts, though, were less convinced about the blow to consumer confidence.

Analysts said moves to provide funds and the G-7 statement showed the will on the part of central bankers and finance ministers to take concerted action, marking a memorable point in their way of dealing with crises. That eased concern that the dollar would keep tumbling in a panic. The real test for the dollar will be when U.S. equity markets re-open. If there is a breakdown in U.S. equities, the dollar will come under pressure.

As with the euro, the yen also rose. Some of the increase, however, could be attributed to the rise in the Nikkei on Friday and the news that reforms were lurching forward with the Mycal bankruptcy. However, much of the action in the yen paralleled the euro.

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