Currencies
The euro fell for the first week in seven against the dollar amid speculation that next week's money supply report will show a rise in M3, making an interest rate cut unlikely right away. Although a leak of this information is unlikely (the report is scheduled for release on Tuesday), the market is looking for impediments to a rate cut and an easing off in the euro's rally. Gains in U.S. stocks also hurt the euro.

The loss snapped a six week rally that was the euro's longest this year and that added about 7 percent to its value. Fueling the gains have been growing concern the U.S. economy won't rebound soon, as well as optimism that the ECB will reduce borrowing costs to bolster growth. Signs of slowing inflation in Germany and Italy, two of the region's biggest economies, are fueling speculation that the central bank has room to lower rates. The euro's six-week run brought it as high as 92.39 cents Wednesday, the strongest since March. Much of the gains, however, have been predicated on an increasingly gloomy U.S. outlook, and so signs of a U.S. revival may lead to a reversal.

The yen traded in a narrow zone as market players were reluctant to push the yen higher for fear of real, not just verbal, intervention in the currency market. The yen's rise is surprising given that the Japanese economy is in recession and the government is promising more pain as it implements its reforms. Japan has huge investments abroad and the uncertainties facing its financial sector and the weak global economy are tending to push capital flows back to Japan, which in turn support the yen. The primary concern is that the U.S. slowdown will result in a global financial crisis that will send even more Japanese money surging home.

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