• Dollar Finds Backing for an Advance in Faltering Risk, European Troubles, Margin Increase for Silver
• Euro Quickly Returning to the Top Headlines as Yields for Sovereign Debt Soar, Auctions Materialize Concern
• British Pound Tempers its Response to Data as Focus turns to Wednesday's BoE Quarterly Inflation Report
• New Zealand Dollar Overvalued According to RBNZ Governor Bollard
• Australian Dollar Gains Weight as Investor Optimism Retreats, Consumer Confidence Tumbles
• Japanese Yen Slides against the Dollar Even as Risk Falls Back


Written by: John Kicklighter, Currency Strategist

Dollar Finds Backing for an Advance in Faltering Risk, European Troubles, Margin Increase for Silver
Despite the dollar's recovery from 11-month lows after the significant advances made this past Friday and Monday, confidence that this was a lasting move was still shaky. Though the currency was showing obvious strength with aggressive and broad gains, it was highly likely at that point the gains were simply a natural correction from extremes. After a significant drive in any market, a rebalancing eventually becomes necessary. Just how aggressive and prevalent this curative move proves to be is where timing enters the picture. Generally, a correction is by its very definition limited. On the other hand, if the retracement can last long enough; it could eventually shift the underlying assessment of the currency's bearings or keep the market in a holding pattern until a more permanent driver can take up the responsibility. We may be seeing the dollar following the path in the latter scenario. Adding to the dollar's stand-alone strength these past few days, we have seen risk aversion start to catch. As a benchmark for speculative interest, the S&P 500 fell 0.8 percent through Tuesday's close, crude had stalled in its most consistent advance since April and the manipulated 10-year Treasury note has suffered its biggest decline in two months. However, this is still a preliminary move. There is still a critical need for fundamental support of risk aversion and the US dollar...

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