If china govt BUY as % of Morgan Stanley, in USD, they are not going to sell USD dollars to further reduce there investment. Same for the the Arabs, any investment is USA coy buy foreign holders of USD is BULLISH for the $USD. No change in major policy, so downside USD is limited....maybe
potential interest rate changes are a fundamental that often, not always, currencies respond to (or traders do); they do so by falling/rallying sometimes travelling sideways up to the time of the announcement, so the $ should base this week then rally till the Jan 30 FOMC announcement, whereas the ⬠will fall so a larger profit rally can occur; the major bet will be by how much the Fed will cut the BoE and ECB will announce any rate changes on Jan 10 -- none expected ??? while the general state of the US economy/inflation is a usual major rate-change influence, of more concern at present is the subprime/credit crisis which isn't over and expected to reveal its worst this quarter, many believe the Fed will have to lower a full point if not more before matters are resolved Feds meet: Jan 29/30 Mar 18 Apr 29/30 Jun 24/25 Aug 5 Sep 16 Oct 28/29 Dec 16 the lower the $ the lower the cost of Crude Oil to non $ currency countries; pointed out that while the ⬠has risen it's led to higher efficiency/production for exporters -- a positive result meaning 'Europe' is far from recession and there's anyway been significant changes in what now contributes to the GDP of many countries in addition it should be noted that in the last decade new 'middle class' consumers at least equal to the population of the US have evolved in China, India and elsewhere that may take up the slack of any US slowdown, which may remain more domestic than international, (and watch out that Friday's Dec Job Report isn't revised upwards in Feb, or maybe not)
I'm thinking the USD didn't drop more because the market still isn't convinced the fed will cut by 50.