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The U.S. Dollar continued trading higher against most of the major currencies last week, with the exception of the New Zealand Dollar which gained a rather modest+0.6 percent against the Greenback.

The previous week’s rumors of an impending default of Irish banks materialized to some extent last week as the Irish financial crisis remained the focus of international financial markets for most of the week and substantially affected the forex market.

Guest post by  ForexTraders.com

The Japanese Yen declined last week and was the biggest loser against the Greenback among all the major currency pairs, falling by -1.2 percent. The Yen was followed by the Pound Sterling, which shed -0.9 percent, and the Canadian Dollar also lost -0.9 percent against the Greenback.

Furthermore, the other commodity dollars turned in a mixed performance with the Australian Dollar losing only eleven pips or -0.1% on the week and ending virtually unchanged, while the New Zealand Dollar was the only major currency which gained ground against the U.S. Dollar last week, rising by +0.6 percent.

The Euro “” which was under considerable pressure last week due to the crisis situation in Ireland “” closed on Friday of last week also virtually unchanged against the Greenback, ending the week lower by a mere seven pips.

Overall, the U.S. Dollar Index rose by +0.42 last week from 78.08 to 78.50, and it showed a net gain of +0.54 percent on the week. The Dollar Index is now showing a net gain of +0.64 points or +0.83 percent for the year to date.

The United States economic calendar picked up last week versus the previous week; however, U.S. economic releases remained mixed. Positive exceptions were the Retail Sales number out early last week and the Philly Fed Manufacturing Index that each showed considerable improvement for the U.S. economy.

Specifically, U.S. Retail Sales improved by +1.2 percent last week, versus a previous +0.7 percent number that was revised up from +0.6 percent, with the market consensus expecting only a +0.7 percent rise. Also, the Philly Fed Manufacturing Index released on Thursday was by far the most impressive economic release for the United States last week. The important indicator came out at 22.5 versus a previous reading of just 1 when the market’s consensus was only expecting a 5.1 number.

U.S. Dollar Continues Gaining on Risk Aversion

The Greenback’s diminishing strength last week seems to have had much to do with the diminishing level of risk appetite in the market among international investors. Risk aversion increased considerably in the wake of the uncertainty in the European Union that was led by the Irish financial crisis coming to a head last week.

The Euro’s problems began the previous week with the Irish bond market taking a significant hit after margins were doubled from 15 to 30 percent by LCH.Clearnet for investors holding Irish bonds. This news and rumors of an imminent Irish bank bailout prompted a run on Irish banks and general nervousness among investors.

The critical situation in Ireland continued weighing on the Euro and soon became the focus of international markets as investors around the world reacted with concern to the developing debacle.

The Irish situation also put additional pressure on the debt markets of Spain and Portugal fueling a rally in the CDSs for the debt of those countries. Nevertheless, the situation seemed to have been brought under control by the end of the week with Ireland finally accepting a joint IMF/EU emergency bailout package.

EURUSD reacted considerably to the events by dropping significantly early in the week. Nevertheless, it managed to rally back on Wednesday, Thursday and Friday as the prospects for a viable solution involving Ireland accepting the emergency joint debt relief package from the EU and IMF became more likely towards the end of the week.

After the dust had settled, the Euro ended the week on Friday off by a mere 7 pips overall versus the previous weekly close, and so was virtually unchanged against the Greenback for the week.

Commodity Currencies Mixed

The Greenback turned in a mixed performance against the commodity dollars last week. It rose against the Canadian and Australian Dollars while declining against the New Zealand Dollar, as the price of gold and crude oil declined for the second consecutive week.

The Greenback gained +0.9 percent against the Canadian Dollar in the wake of mixed economic numbers out of Canada and safe haven buying of the Greenback. The Australian Dollar ended the week unchanged for the most part, closing down eleven pips or -0.1%.

For its part, the New Zealand Dollar was the only major currency which gained against the Greenback last week after having lost -2.9 percent the previous week. The Kiwi gained +0.6 percent overall last week and benefitted considerably from higher than expected New Zealand inflation numbers out last Thursday.

The inflation numbers showed New Zealand’s PPI Input had increased by +0.7% for the quarter, compared with an expected rise of only +0.4%. In addition, New Zealand’s PPI Output had increased by +1.2% for the quarter versus a consensus of a mere +0.6% rise.

The high producer price inflation numbers came after a notable decrease in the N.Z. unemployment rate from 6.9 percent to 6.4 percent seen earlier in the month. The combination makes the likelihood of an RBNZ rate hike considerably more likely in the near term to combat possible inflationary pressures.

Yen and Sterling Weakest Performers against the Greenback

The Japanese Yen and the Pound Sterling were the weakest of the major currencies last week against the U.S. Dollar.

The corrective rise of +1.2 percent in USDJPY comes after the rate continued making lower lows “” with the exception of the previous week “” since mid September when the BOJ most recently entered the currency market to intervene in order to bring down the value of the Yen.

The Pound Sterling also declined against the Greenback last week, falling by -0.9 percent. According to an estimate published in the Sunday Telegraph over this past weekend, British banks have more than £140B in exposure to Ireland and its current financial crisis. As a result, any worsening in the Irish crisis situation could put further pressure on Sterling, as well as on the Euro.

Weekly Recap and Outlook for the U.S. Financial Markets and Dollar – 11/22/2010 The U.S. Dollar continued gaining ground against most of the major currencies last week, with the notable exception of the New Zealand Dollar that gained fractionally against the Greenback. Risk aversion once again took center stage in the world market as Ireland became the second European nation to require economic assistance from the IMF and the EU. Read full report

Weekly Recap and Outlook for EURUSD – 11/22/2010 EURUSD traded in a wide range last week, eventually ending the week showing little net change. The rate started the week by trading lower off of its weekly high of 1.3750 seen on Monday as the Greenback picked up steam on risk aversion and the increasingly dire situation for Irish sovereign debt put considerable pressure on the Euro. According to a story published last Monday in the Irish Independent newspaper, Irish Finance Minister Brian Lenihan was anticipated to request up to 80B Euros in emergency aid through 2013. Read full report

Weekly Recap and Outlook for GBPUSD – 11/22/2010 GBPUSD traded considerably lower last week as the continuing financial problems in Ireland put additional downside pressure on the rate. Sterling started the week off on Monday by trading on a soft note as it came off of its weekly high of 1.6153 as Irish officials considered requesting up to 80B Euros between 2011 and 2013 in emergency funds from the IMF and EU. Monday also saw the Greenback pick up steam on investor risk aversion resulting from the increasingly dire situation for Irish sovereign debt that also put considerable pressure on the Euro and the commodity dollars, as well as on Sterling. In economic releases for the U.K. out on Monday, the Rightmove HPI fell by -3.2% for the month that was a disappointment   compared to its previous reading of an increase of +3.1%. U.S. economic releases out last Monday included U.S. Retail Sales, which improved by an impressive +1.2% for the month that was significantly better than the +0.7% anticipated, while Core Retail Sales came out as anticipated at +0.4% for the month. Also out on Monday were U.S. Business Inventories, which increased by +0.9% for the month compared with a consensus of an increase of +0.6% and the previous number was revised significantly higher from +0.6% to +0.9%. In addition, the U.S. Empire State Manufacturing Index fell by -11.1 that was considerably below the increase of +13.9 anticipated.   Read full report

Weekly Recap and Outlook for AUDUSD – 11/22/2010 The AUDUSD gave back some territory last week as risk aversion prevailed due to the Irish debt crisis and the price of gold continued its downside correction for the second week in a row.  Read full report

Weekly Recap and Outlook for NZDUSD – 11/22/2010 NZDUSD traded a bit higher last week after its sharp corrective drop seen the week before. The Kiwi was the lone gainer last week versus the Greenback as it firmed in spite of increased risk aversion stemming from the Irish debt and bank crisis and despite a drop in the price of gold that softened the other com dollars. Read full report

Weekly Recap and Outlook for USDJPY –   11/22/2010 USDJPY gained back some ground last week, having the first week without making a new long term low for some time. The week began on a soft note after the BOJ’s monthly report stated that, “Japan’s economy is likely to grow at a slower pace for some time, but is anticipated to return to a moderate recovery path thereafter.” Also on Monday, Japanese Leading Indicators came out at 98.9% compared with a consensus of 99.4%. On Tuesday, USDJPY made its weekly low, with the Yen strengthening after China announced new measures to decrease “hot money” inflows due to concerns over the U.S. Fed’s new QE II measures announced last week. In addition, China raised its reference rate for the Yuan by 0.17% to 6.658 against the U.S. Dollar. Read full report

Weekly Recap and Outlook for USDCAD – 11/22/2010 USDCAD rose significantly last week as the U.S. Dollar benefited from increased risk aversion over the Irish financial crisis and the price of gold came off for the second week in a row. Read full report

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