[DannyBly]

In the midst of the global economic crisis, the US Dollar and the Yen gained the most against the Euro since it's inception in 1999 - as investors made a flight to safety. The dramatic turnaround comes of the heels of the Euro reaching it's record high against the dollar of 1.6036 only this July.

The Yen strengthened against the Australian and New Zealand dollars as global economic weakness led investors to unwind carry trades. The weakness in commodities, which constitute over half of their exports, also weighed on the AUD and NZD.

Global Rate Cuts

The Federal Reserve lowered it's target lending rate by a half percentage point to 1% - the lowest since June 2004 and equal to the level of the Eisenhower administration of the 1950's. With the benchmark fed funds rate at 1% it is second only to Japan's key rate of 0.3% as the lowest among industrial nations. The BOJ lowered it's target lending rate from 0.5 to 0.3% on Friday.

The Bank of England is expected to cut rates to 4% on November 6th when it announces it's decision. Sterling dropped 9.7% in October - the largest decline since George Soros drove the currency out of Europe's system of linked exchange rates in 1992.

ECB president Trichet said policy makers may announce a rate cut this week - putting further pressure on the Euro.

Employment Report

The Employment Report set to be released this Friday is widely expected to show that the economy lost 200,000 jobs in October. Economists are also expecting an unemployment rate of 6.3%, the highest since 2003.

While the Dow rallied 11% last week, it lost 14% for the month. The S&P declined 16.9% for the month - it's largest loss since 1987.

The strength in the USD is a double edged sword - it usually means lower long term interest rates and cheaper prices for goods imported to the US. However the appreciation in the USD makes exported American goods more expensive in markets outside the US. Unfortunately, the USD strength reflects a flight to safety rather than a robust US economy.