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The  US dollar and the Yen continue to work in correlation, and today, the dollar made gains – the Yen extended them.

I’ve written in the past about the Dollar Yen Correlation. In previous events, such as the FOMC Trillion dollar printing statement, the dollar weakened, and then the Yen weakened even more.

Today, it was an upside story. The dollar made gains, and the Japanese Yen strengthened even more. Forex trading this week opened with a stronger dollar. Explanations for the dollar’s rise are probably to news about the G20 summit.

Leaders of the G20 countries will meet in London on Thursday, but the talks behind the scenes are already leaking out. A leaked draft suggests that there will no mention whatsoever of a new world reserve currency. No SDR. No currency baskets. The dollar will stay the king.

I must say that this comes as no surprise to me: Chinese and Russian talks about this were for political reasons: both countries don’t want to see America intervene in their back yard. China “retaliates” to Timothy Geithner’s comments when he just entered office. He then said that China was manipulating the Yuan, and keeping it too low.

The G20 summit will probably refrain from spending. There won’t be a joint effort to fight the global crisis. No spending means less dollar printing – stronger dollar.

Anyway, the dollar went up: EUR/USD fell to 1.31, GBP/USD to 1.41 and USD/CHF rose above 1.15, getting back to the old range.

Only the Japanese Yen gained strength against the dollar. USD/JPY dropped to 96 before retracting back to 97.40.  

So, yet again, when the dollar made a big move, the Yen moved more. Big in Japan!

As it happened in the previous Non Farm Payrolls, the biggest moves were in the crosses: EUR/JPY,GBP/JPY and CHF/JPY all made big falls today, falls bigger than the majors.

Will the upcoming Non Farm Payrolls this week supply a similar correlated movement? Will the  Yen crosses rule the board? Interesting…

In the meantime, I would be glad if you could participate in my poll: What Leverage do you prefer?

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