Currencies
Currency traders also turned to economic indicators last week and, as a result, currency values did not track stock markets as closely as in the prior weeks. The euro fell below parity against the dollar after economic reports in Europe emphasized the economic weaknesses there. Business and consumer confidence fell amid rising unemployment and weakening domestic consumption and exports. So far this year, the CAC is down 30 percent and the DAX is down 31.5 percent.

German retail sales fell in June as rising unemployment and falling stocks kept shoppers away from stores. French June unemployment rose to 9 percent from 8.9 percent in May. Despite the hand ringing over U.S. economic performance, Europe is growing at an even slower pace. Money is moving out of Europe and into dollar assets. Germany grew 0.2 percent in the first quarter after last year's recession, while the U.S. economy expanded an annual rate of 5 percent.

Further evidence of economic weakness in the United States failed to undermine the dollar on Friday. Although the non-farm payroll figures were worse than expected, there were strong upward revisions to job creation in previous months. However, the dollar was not hit as hard as usual partly because markets had already become more bearish on the U.S. economy.

The yen traded within a narrow range last week and provided Japanese exporters with an opportunity to repatriate earnings at a better rate than in prior weeks. Of late, exporters have not only had to deal with a rising yen, which directly impacts earnings, but also slowing exports, which affect sales overseas. When exporters forecast profits, they generally assume a certain value for the yen/ dollar. So far, the yen has been at a much higher level than the widely estimated 125 level.

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