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If the stock market is too depressing, take a look at the U.S. dollar. Its recent strength is a feel-good bright spot amid the stock market's plunge, but its reign as lesser of all evils can't last forever. The currency's value could hit a rough patch with this week's data, which will paint a clearer picture of how dramatically the U.S. economy is really slowing. The value of the dollar vs. the euro and the yen continued to climb this week, reaching highs Tuesday that it hasn't seen since April. The dollar closed 4.25% higher Tuesday at 115.36 yen -- near its 200-day moving average of 115.70. The euro dropped 1.98% to $1.2532. There are several external factors supporting the dollar's current favor, but the rationale for U.S. currency strength could fall apart if the economy at home looks worse than expected. The May economic data released this week could bear out expectations that the second quarter has weakened from an exceptionally strong first quarter. The Empire State Manufacturing Index, May data on industrial production and capacity utilization, June's Philadelphia Fed Index, May housing starts, and May durable goods orders come out on Thursday and Friday. In the meantime, the global risk-rebalancing continues as the tide of liquidity goes out, making the dollar a popular parking place to ride out the storm. U.S. Treasury bonds also have found themselves a safe-haven bet as hedge funds get out of risky assets around the world and unwind their carry trades. "The dollar's rally has taken on the form of being opportunistic in nature," says Ashraf Laidi, chief currency analyst at MG Financial Group. The following factors support the dollar while the shakeout occurs: 1.) Gold is considered another currency, so selling gold usually means a flow of funds into dollars. The precious metal experienced its sharpest decline Tuesday since 1991, according to Miller Tabak. Gold for August delivery fell 7.28% to close at $566.90 per ounce and is down 21% since its peak in mid-May. In what was partly a skimming of speculative froth, other precious metals suffered Tuesday as well. Silver fell 13% to $9.62 per ounce Tuesday, and copper declined 6.8% to $3.01 per pound. These metals are down 28% and 25% from their May highs, respectively.
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