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Today’s FX View from IB:

The dollar and yen both continue to benefit from ongoing uncertainty over the perceived dangers to the growth outlook within the Eurozone. A weekend meeting of G7 ministers failed to deliver a stronger message than the European commission had delivered last week. Investors had been optimistic ahead of the weekend that a deeper resolution may have evolved from the meeting this weekend. Equity prices rose strongly in the final half hour of trading to deliver a positive close for an ugly week on Wall Street. Ahead of today’s session, equity index futures had earlier pointed to a five-point gain for the S&P 500 only to see prospects for a positive start erode after GM joined the recall craze for its Vibe model. The reason – sticky accelerator pedals. The same problem faces investors pushing on the gas pedal when it comes to buying dollars. However, there doesn’t seem to be a reason in sight to expect a recall.

Euro – The euro continues to flounder reaching a one-year low against the Japanese yen at ¥120.75 and its weakest price in nine-months against the dollar at $1.3586. It did reach $1.3715 earlier in Europe as equity prices rebounded but the backdrop of the ghastly Greek situation just won’t go away. The current situation means investors are placing less emphasis on domestic data and reacting instead to the flow of (plentiful) headlines on any changes to the Greek situation and how that might be overflowing into the Iberian peninsula.

Over the weekend an interview with Greek finance minister George Papaconstinou was published. The minister understands and expects the market and the European commission to pore over monthly government data for signs that the Greek government is sticking to its task of reducing the budget deficit equivalent to 12.7% of GDP to less than 3% by the end of 2012. Mr. Papaconstinou emphasized the critical nature of the first three months of this year. He wasn’t wrong on that front and we can only hope that the situation doesn’t deteriorate in the second quarter.

Investors fretful of the ability of the situation to worsen will scrutinize this week’s expected new tax and wage policy measures to get a sense of how well the government is sticking to its plan. The minister has promised to tackle tax evasion and to end the flat rate taxation for some professional groups.

While civil servants have already called a 24-hour midweek strike and private sector unions will strike later in February, Mr. Papaconstinou appears to have the support of the majority of voters. Weekend polls show the majority backing the government’s policy of austerity, saying that the measures are both necessary and fair. From the domestic perspective at least, there may yet be hope for the Greek rescue plan. The trickier aspect is to persuade the markets that the government means business.

British pound – The pound reached its weakest point in almost nine months against the dollar at $1.5535 to open the week as the sovereign risk contagion story continues to dominate. Later in the week the Bank of England is expected to announce in its quarterly inflation report lower growth and higher inflation for 2010.

Aussie dollar – The Aussie dollar’s Friday low at 85.78 U.S. cents marked the cheapest it’s been since the beginning of October against the U.S. dollar. It also reached its weakest point in seven months against the Japanese yen at ¥76.20. Despite the negative tone to start the week the Aussie has so far stayed above that low and is currently trading a penny above there at 86.80 cents. Later in the week the Australian employment report is expected to reveal a further gain of 15,000 domestic jobs.

U.S. dollar – The dollar index remains close to a seven-month high on Monday although is slightly down against the currency basket to start the week. The dollar continues to benefit from the weakness in European fundamentals and frustrations over the pace with which the domestic economy is recovering. Typically, such frustration would undermine the dollar given the plausibility of no change in monetary policy along the foreseeable horizon. However, the dollar seems to have given over its crown of least appeal to the Eurozone for now and is faring better as a safe haven basis.

Japanese yen – Along with the dollar, it’s the yen that is also feeling the relative discomfort of safe haven flows. In response to continued yen strength and the sense of unfinished business in the Eurozone, the Nikkei shed 1.1% overnight as shares of exporting companies fell. The dollar today buys marginally less yen at ¥89.27, while the yen is stronger against the pound at ¥139.27.

Canadian dollar – The Canadian dollar is one of the few currencies that continue to stand up to dollar strength. We know that over recent months a couple of major central banks have indicated their willingness to explore the domestic currency as an alternative to the traditional U.S. currency. The local dollar is higher today at 93.44 U.S. cents despite a decline in the price of crude oil. The jump in gold over the weekend possibly accounts for some demand for the loonie.