Big Comeback for the Dollar

Overall: The dollar made back most of its losses from Thursday as oil declined more than $3 per barrel after BP restored shipments on a Caspian Sea pipeline through Turkey, easing concerns about supply. It became apparent the Russians had not damaged the Baku-Tbilisi-Ceyhan pipeline, which moves oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, when it resumed working after a fire shut it earlier this month. There was no economic data released in the U.S. on Friday, but statistics regarding existing home sales for July will be released on August 25 at 10:00 EDT.

The euro (Euro/Usd) declined 0.66% on Friday as oil prices retreated. Euro stat reported that European industrial orders declined 7.4% in June, the most in more than six years, led by a 29.8% drop in the volatile transportation sector. When excluding production for items such as planes and rail cars, production fell 1.5% in the year. Data regarding orders and output have lost momentum in recent months. In Germany, Europe's largest economy, orders fell in June for a seventh straight month, an indication that the continent's important manufacturing sector is likely to weaken further.

The cable (Gbp/Usd) declined 1.3% after the Office for National Statistics said that in volume terms (adjusted for inflation), Q2 2008 U.K. GDP stagnated compared with the previous quarter and was just 1.4% higher than Q2 2007, the weakest since 1992. Minutes of the monetary policy committee's last meeting indicated rates could stay on hold even as the economy slows, because the bank projected that inflation could return to target within 2 years if rates remained unchanged.

The aussie (Aud/Usd) declined for the first time this week after gold and other commodities fell. Commodites are still expected to decline going forward, since it is likely to see growth decelerations in the U.S., U.K., Euro area and Japan over the next several quarters. When combined, those economies make up about half of total global output each year.

The cad (Usd/Cad) rose for the first time in four days as the U.S. dollar rallied when crude oil, gold, silver, copper and platinum declined. The loonie has risen 1.3% since August 15 and will advance for a second week. The Reuters/Jefferies CRB Index of 19 commodities slipped 0.9% today after rising 3.7% to 405.72 yesterday. A close at that level today would mark the biggest weekly gain since July 1975.

The swissy (Usd/Chf) rose, making back nearly all of the decline from Thursday as traders dipped into equities. The next area of resistance for the pair looks to lie at 1.1040, the high made during last Wednesday's trading session. Traders may also be looking for a break of 1292 on the S&P 500 as conformation of a move to the upside.

The yen (Usd/Jpy) rose as U.S. equities found favor with investors on Friday. The market may have been somewhat soothed after Federal Reserve Chairman Ben Bernanke said in speech on Friday that officials still believe inflation will moderate, an indication to many that the Fed intends to remain on hold at least through the end of the year.

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