Currencies: Forex Action Muted, euro Continues to Gain Steam

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There is mixed motion in the dollar this morning in a slow start to the new year.

While currency crosses continue to set new multi-month highs, trading volume remains light. "The story is still the same," said David Gilmore, partner at

Foreign Exchange Analytics

, continuing that "pessimism on the U.S. economy and Japanese economy, and a relatively optimistic view on the European economy," are driving trading this morning.

Worries about the slowdown in economic growth in the U.S. and the struggling Japanese markets have been the impetus for a weakening yen and dollar, and a strengthening euro over the last several weeks.

Gilmore said that the light volume today is due to "people just returning from vacation."

The dollar is slipping marginally to the euro this morning, with the euro most recently trading at $0.9435 from $0.9432 at last close. The euro hit new five-month highs versus the dollar earlier this morning.

The euro also hit new 10-month highs versus the yen this morning, continuing the strong upward movement of late in the euro/yen cross. The euro/yen cross was most recently trading at 108.46, up from 107.75 at last close.

Due to beliefs that the Japanese economy is faltering at a more alarming pace than the U.S. economy, the dollar was recently firming against the yen, trading for 114.96, up from the last close of 114.53. This is a new 16-month high for the dollar/yen cross.

The new highs set this morning are "pretty significant moves, even if there's not a lot of volume," Gilmore said.

The U.S. currency is slipping at the margin to the Australian dollar, with the Aussie currency trading for $0.5589, up from $0.5585. The Canadian dollar is also making gains on the U.S. currency, with the U.S. dollar trading at C$1.4960, down slightly from its last close of C$1.4976.

The British pound is falling in value against the dollar, resultant of its loss of strength versus the firming euro. The pound was recently trading at $1.4901, down from $1.4954.

The Israeli shekel is also making news, losing almost 1% of its value against the dollar due to ongoing concerns about the Middle East peace process. With burgeoning fears that no agreement will be reached before President

Bill Clinton

leaves office, investors are bailing out of the Israeli currency.