In the currency market, the dollar rallied against the euro. Late Tuesday, the euro was trading at $1.3319 vs. $1.3365 on Monday.

“Optimistic comments from Federal Reserve Chairman Ben Bernanke and a slower pace of contraction in the service sector have helped to drive the U.S. dollar higher,” said Kathy Lien, director of currency research at Global Forex Trading.

The Institute of Supply Management reported yesterday that its non-manufacturing (services industry) index improved to 43.7% from 40.8% in March. While readings below 50% still indicate contraction, it was the index’s first increase since January.

The gain beat the expectations of economists, who had been projecting the index to rise only to 42%.

“This report is an encouraging sign that the intensity of the recession is diminishing,” wrote John Ryding and Conrad DeQuadros of RDQ Economics.

And Big Ben chipped in with: “The recent data … suggest that the pace of contraction may be slowing,

In the currency market, the dollar was down once again against the euro. Late Monday, the euro was trading at $1.3365, the highest level in almost a month, vs. $1.3268 on Friday.

Good news for the economy turned out to be bad for the buck, as pending home sales rose in March, buoying hopes that the housing downturn may be ending.

The National Association of Realtors said pending sales increased 3.2% in March, more than analysts had been anticipating.

“This is the second month in a row that pending home sales have increased which adds to the overall belief that we are seeing serious signs of stabilization,” said Kathy Lien, director of currency research at Global Forex Trading.

Also factoring in, “Another Wall Street rally is largely seen behind the softer dollar, as risk appetite remains at more elevated levels,” analysts at Action Economics said.

“When risk aversion declines, stocks do well, the dollar

In the currency market, the dollar edged slightly higher against the euro. Late Tuesday, the euro was trading at $1.3013 vs. $1.3022 on Monday.

In the day’s big number, the Commerce Department reported that U.S. housing starts surged 22% in February, to a seasonally adjusted annual rate of 583,000. That marked the largest percentage gain in 19 years and was the first increase in eight months in the sector.

That tiny ray of light brought out the optimists. “The 22% rise in starts is very impressive and leaves open the possibility of a bottom in the housing market,” wrote Kathy Lien, of GFT in New York.

Separately, the Labor Department said the producer price index rose 0.1% in February, driven by a 1.3% gain in energy prices, with core prices—excluding food and energy—up 0.2%. Analysts had been expecting PPI to rise 0.4%, and for the core to gain 0.1%.

“While the strength

In the currency market, the dollar rose against the euro. Late Wednesday, the euro was trading at $1.255 vs. $1.2622 on Tuesday.

The buck benefited from a flight to safety, as equities were unable to gain any traction after Tuesday’s big selloff.

In addition, “With trouble brewing in Europe, the new programs announced by the Obama administration should keep the U.S. dollar attractive to investors over the medium term,” said Kathy Lien, director of currency research at GFT.

Perhaps with fingers crossed, Fed Chair Ben Bernanke said yesterday that the “extraordinary measures” taken by the Fed to restore the flow of credit vital to the U.S. economy won’t stoke inflation.

“A significant shrinking of the balance sheet can be accomplished relatively quickly,” Bernanke said, noting that many programs are designed to automatically disappear once market conditions improve, though others will require more active intervention.

“At this point, with global economic activity weak and commodity

In the currency market, the dollar slid against the euro. Late Friday, the euro was trading at $1.2887 vs. $1.2858 on Thursday.

The session was marked more by what traders are waiting for than by what they saw.

Many had their eyes on the agenda of finance ministers and central bankers from the Group of Seven wealthy nations gathering in Rome last night and today.

While most are not expecting a significant change in the wording of the group’s communiqué today, G7 meetings are nevertheless closely watched by currency markets for crucial changes in tone that can sometimes foreshadow crucial turning points.

“Although no one is happy with the sharp moves in the U.S. dollar, Japanese yen and British pound, they may not be willing to commit to harsher language on Asian currencies,” said Kathy Lien, director of currency research at GFT. “The dollar is already strong, and a tougher stance on the

…

Bloomberg notes that the pound, which is used to trade cocoa in Africa and in London, rose on Friday by as much as 2.4% against the US dollar after a three-day slump of 4.2%. Cocoa, which gained 31% in 2008 and has risen by 6.3% YTD, had fallen earlier this week based mainly on speculation that supply from Ghana, the biggest grower after Ivory Coast (the two combine for nearly 60% of world production), would expand because of recent rainfall in some of the country’s main producing regions that would boost the harvest (which started in September and runs until June).  On Friday, however, cocoa futures for May delivery climbed $23, or 0.9%, to $2,672 a metric ton on ICE Futures U.S. in New York.

Yet Michael Ragazzo, president of MBL Commodities Ltd. in New York, …

In the currency market, the dollar sank against the euro. Late Friday, the euro was trading at $1.2932 vs. $1.2861 on Thursday.

Yesterday came the grim jobs figures everyone was expecting. The Labor Department reported that non-farm payrolls fell by a seasonally adjusted 598,000 in January after a revised loss of 577,000 in December. That marked the largest payroll loss since December 1974.

At the same time, the unemployment rate soared to 7.6%, compared with 7.2% in December. That was even worse than already-pessimistic economists’ expectations for a rise to 7.5%, and is the highest unemployment rate since September 1992.

“These numbers are dreadful but does it matter?” asked Alan Ruskin of RBS Greenwich Capital. “No,” he wrote. “All the prior labor market indicators, notably the claims data, gave a feeling of foreboding before these numbers. The data broadly delivered.”

And Kathy Lien, director of currency research at GFT, pointed out “that traders

In the currency market, the dollar was little changed against the euro. Late Thursday, the euro was trading at $1.2861 vs. $1.2846 on Wednesday.

The day’s major number was the Labor Department report that new claims for state unemployment benefits surged 35,000 to a seasonally adjusted 626,000 in the week ended January 31. That’s the highest level in 26 years.

Continuing jobless claims, a more smoothed-out figure, rose by 20,000 in the week ended January 24, to a seasonally adjusted 4.79 million, the most since the government’s record-keeping began in 1967.

All markets are girding for today’s job loss numbers, which are expected by economists’ consensus to top 500,000 for the third straight month.

Sterling rallied against both the euro and the dollar yesterday, soaring to nearly $1.47 to the buck as the Bank of England continued its aggressive interest rate policy. The BoE sliced the official bank rate to 1% from

In the currency market, the dollar slipped against the euro. Late Friday, the euro was trading at $1.3287 vs. $1.3149 on Thursday.

The buck was hurt by the latest bailout move from Washington.

As reported by MarketWatch.com, “the U.S. Treasury announced it would inject $20 billion into Bank of America Corp. (NYSE:BAC) It also will provide a backstop against losses on some $118 billion in assets as the banking giant struggles to digest its acquisition of troubled brokerage Merrill Lynch.”

Of the bailout, Kathy Lien, director of currency research at GFT, said that, “The additional funds provided to B. of A. is the only reason why the dollar is rallying against the Japanese yen, and why we are seeing a recovery in all of the higher-yielding pairs such as the euro/dollar and pound/dollar.”

Across the pond, the Irish government said it would nationalize Anglo Irish Bank, the country’s third-largest lender.

That

US dollar falls against euro, currency basket… Pound hits 6-1/2-yr low vs dlr, near parity with euro… Swiss franc supported by Israel-Hamas conflict… Prices of US single-family homes plunge in October

The U.S. dollar fell against the euro and a basket of currencies on Tuesday as weak U.S. housing data and a dim economic outlook for the start of 2009 weighed on the currency.

The contrast of aggressive monetary easing in the United States versus a more cautious European Central Bank is lending support to the euro while hurting the greenback, analysts said.

Some market participants also cited the ongoing conflict in Gaza and Israel, as supporting the Swiss franc near a five-month high.

Meanwhile, sterling continued its downtrend, hitting a 6-1/2 year low against the U.S. dollar and hovering near record lows in sight of parity against the euro on prospects of UK interest rates being cut