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After yesterday's strong gains by the dollar on hopes that the

Fed would cut interest rates in the near future, the dollar fell overnight against most currencies as rate-cut optimism began to flag. The realization set in last night that while more bad news today may provoke further rate cuts, it also sharpens the chances of a hard economic landing.

The dollar was largely down before this morning's

consumer durables

data. The currency initially slid after the data was released, but it quickly recovered to the narrow range in which it was trading before the data's release.

January's consumer durables slipped by 6%, twice as much as the expected 3% dropoff. While this provides potentially strong ammunition for the Fed to cut interest rates -- which, in theory at least, should prop up the equity markets, which in turn should bring money flows back into the country and thus strengthen the dollar -- the currency markets remained relatively unchanged by the news. With expectations so high these days, the news is most likely priced into the markets already.

Consumer confidence

figures, just released, fell off again this month. The confidence figures, largely trailing off in recent months and cited as a major factor in the Fed's decision to cut interest rates by 50 basis points on January 3 of this year, may prove to be a more significant market mover than was the durables report.

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The euro was trading up on the dollar recently, at $0.9151, up from $0.9114, and little changed since before this morning's durables data.

As Japanese repatriation of yen -- the trading of foreign currency for yen by large Japanese corporations for accounting purposes -- is winding down as Japanese corporations' fiscal year closes, the recent demand for yen that has been propping it up is starting to slow. But the concerns over the U.S. economy are weakening the dollar further than the yen, causing the yen to gain on the dollar today.

The dollar was recently trading for 116.27 yen per dollar, down slightly from 116.51 yen at yesterday's market close. The Japanese fiscal year ends the last day of March, and so Japanese companies traditionally repatriate vast quantities of yen in February, ahead of the final stretch.

The euro's strength is overpowering the yen's strength today, as the euro is making slight gains on the Japanese currency. The euro was recently trading at 106.44 yen per euro, up slightly from 106.18 at yesterday's close and unchanged since before the U.S. consumer data.

Bank of England

members commented this morning on their fears that the economic slowdown in the U.S. may spread overseas, causing the British pound to slip in value against the dollar. Some economic data in the euro zone has started to show signs of a possible slowdown there, but a clear conclusion cannot as yet be drawn. The pound was recently trading for $1.4417, down from yesterday's close of $1.4460.

The Australian dollar is again tracking the European single currency, gaining slightly on the U.S. dollar. The Aussie buck was most recently trading for $0.5249, up just slightly from $0.5229 at Monday's close.

The Canadian dollar, once again, is going against the grain of the major currency players today, and losing value to the U.S. currency. The U.S. dollar was most recently at C$1.5297, up just slightly from its last close of C$1.5280.

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