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The signs of dollar strength that emerged last week in the foreign exchange market have continued into early trading this week. The dollar continues to benefit from recent economic data that suggests the U.S. economy is strong and that additional interest rate increases may be in the pipeline.

The dollar seems to be in a medium-term up trend. "It firmed up on Friday following Thursday and Friday data," said Robert Lynch of


in New York. "What you're seeing this morning is a firm tone, if not higher levels," he said.

Additional issues of financial corruption in Japan have dogged the yen and reinforced the broad sense that the dollar is the safest place to be.

Dollar/yen is opening steady at 109.40, after touching 109.80 in earlier trading. The yen has now fallen about 3% since the news of the


department store chain bankruptcy earlier this month. Traders note that international capital flows continue to support the dollar as funds are leaving Asian markets and moving to the U.S.

Adding to the problems of the yen, is increasing evidence of regulatory problems in Japan. An important Japanese financial regulator resigned overnight after admitting he took payments from a bank while he was a member of Parliament. This follows similar issues of questionable financial behavior by senior officials in Japan.

These ongoing regulatory concerns are seen as adding to the yen's woes. " It's not really a political issue, but if it interrupts other policies, it's not really helping," Lynch said.

After losing around 1% on Friday, the euro has remained soft, just above the $0.92 level, to open in New York at $0.9240. The market remains primarily focused on the merits of the dollar and is not excited about the improving undertone to the single currency.

Producer prices in the major countries of the euro zone rose moderately in the latest month, for year-on-year increases well above target levels.

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With both the yen and the euro unable to make headway against the dollar, the euro edged lower against the yen and is at 101.10.

Dollar/Swiss franc is slightly lower and is opening at 1.6740. The euro/Swiss franc rate is little changed at 1.5470. Traders see Swiss economic growth lagging U.S. growth as the year progresses.

The pound has also fallen against the dollar and is opening at $1.4970. Euro/sterling is stronger at 61.80 pence. Traders expect the pound to fall against the dollar this week, as the probability of interest rate hikes in the U.K. is now seen as lower than that of rate increases in the U.S.

Consumer credit in the U.K. rose just under a billion pounds in June, less than expected.

"There was another M&A deal overnight and that put downward pressure on cable

Sterling/dollar, but that is also in tune with a generally stronger dollar," Lynch said.

The Canadian dollar lost ground in the face of U.S. dollar strength and is opening C$1.4820, following through on Friday's weakness.

The Australian dollar is opening much lower at $0.5785. The New Zealand dollar is also weaker at $0.4535.

The South African rand is a little firmer at 6.94.

The Polish zloty is little changed around 4.34 per dollar.

Asian currencies are generally lower under the twin pressures of a strong U.S. dollar and a weak yen. The Indonesian rupiah has given up nearly 1% to open at 9,010 per dollar.

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