Stocks Manage Slight Rally

The 10-year Treasury note was down 15/32, yielding 4.17%, following positive comments on job growth from Fed Governor Ben Bernanke.

Elsewhere, the dollar was weaker vs. the euro, with the euro recently worth $1.2541. The U.S. currency strengthened vs. the Japanese yen, recently buying 105.90 yen.

Currencies: Reading Between the Lines

The major currency crosses have been range-bound in recent weeks, as foreign-exchange traders gear up for the upcoming meeting of finance ministers and central bankers from the Group of Seven nations. The conference will begin Friday in Boca Raton, Florida and last through Saturday.

There has been widespread speculation European and Asian officials will work to stem their currencies' sharp appreciation against the dollar to ensure their economies remain on track. U.S. Treasury Secretary John Snow, on the other hand, continues to stress the importance of letting currencies fluctuate freely in the market. Many have interpreted these comments as an implicit endorsement of a weaker dollar.

Since the G7 met in Dubai last September, "the dollar has fallen 10% in trade-weighted terms, prompting the leaders of the G7-ex U.S. to be more vocal about the impact of their appreciating currencies," according to a report issued Wednesday by Ashraf Laidi, chief currency analyst at MG Financial Group.

Laidi expects the finance leaders to compromise and issue a balanced official statement. "The six nations would want to place more weight on instilling currency stability, while the U.S. will once again press for market-based movements and flexibility, which is an implicit request for the Asian nations to let their currencies move more freely [i.e., rise] against the dollar."

In other words, the U.S. would like to let the market take the dollar weaker, which is the likely outcome given the nation's ever-expanding trade and budget deficits. On the other hand, the Europeans and Japanese will stress currency stability; whether that is an endorsement of a gradual appreciation of their currencies or a call for verbal and outright intervention is unclear.