Leading academics and index experts examine how investors should handle the falling dollar.

The Death Of The Dollar?, the November/December 2009 issue of the Journal Of Indexes, focuses on currency and related strategies, with contributions from Invesco PowerShares' Bruce Bond, the International Securities Exchange's Steve Meizinger and Marc Chandler and Jeffrey McCarthy of Brown Brothers Harriman, not to mention a currency primer by Index Publications' own Dave Nadig, Matt Hougan and Lara Crigger.

Other articles in the publication include a look at how EMH weathered the financial crisis of 2008 by David Blitzer, the first installment of a three-part series on improving fund evaluation techniques by Gary Gastineau and a study from David Blanchett on how to figure out the "passive" portion of an actively managed portfolio. And let's not forget the ETF crossword puzzle on the back page!

You can view the entire issue

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 continued to advance against the euro. Late Friday, the euro was trading at $1.3024 vs. $1.3177 on Thursday.

It’s “primarily a question of market positioning and risk management rather than a newfound bullish outlook for the dollar,” said Marc Chandler, of Brown Brothers Harriman.

“Short-term, momentum traders got frustrated with the lack of upside progress in the foreign currencies,” Chandler added, and “the relationship between equity markets and currencies seems to be weakening.”

The common currency also took a hit after remarks by European Central Bank President Jean-Claude Trichet.

Trichet said yesterday that the euro was “not weak” at current levels and that he appreciated remarks by top U.S. officials affirming a strong dollar is in the interests of the United States.

“In our economy, banks play such a dominant role that non-standard measures need to be implemented - first and foremost - through the intervention and with

In the currency market, the dollar plummeted against the euro after the Fed spoke. Late Wednesday, the euro was trading at $1.3485 vs. $1.3013 on Tuesday.

The buck was obviously hammered by traders who didn’t care for the Fed’s monetization move.

It “was taken to the woodshed and beaten like a dog. And after a short rest, beaten like a dog again,” wrote David Watt, senior currency strategist at RBC Capital Markets. “Market sentiment on the Fed’s maneuver was crystal clear.”

Marketwatch.com wrote of the decision that, “Quantitative monetary easing policy carries out monetary easing by using money supply rather than interest rates as its main tool. The benefit of this policy is that more funds can be supplied, even after official rates fall to zero, thereby expanding monetary easing further. The Bank of England, the Bank of Japan and the Swiss National Bank have all adopted it to varying degrees,

In the currency market, the dollar pushed higher against the euro. Late Monday, the euro was trading at $1.3373 vs. $1.3452 on Friday.

It wasn’t so much that the buck soared as that the euro got slammed by news that Standard & Poor’s might cut its ratings on Spain, and by growing expectations that the European Central Bank will cut interest rates later this week.

“At the end of last week, the rating agency S&P put Greece’s long-term sovereign rating on credit watch for a possible downgrade. [Yesterday] it did the same for Spain,” said Marc Chandler, of Brown Brothers Harriman.

“The market appeared to take advantage of the headline announcement to do what they wanted to do and that was take the euro down,” Chandler added.

In addition to the S&P downgrades, there’s been a recent run of abysmal euro-zone data, leading to the ECB expectations. The central bank’s key lending

In the currency market, the dollar plummeted against the euro, the fourth straight day of losses. Late Monday, the euro was trading at $1.3679 vs. $1.3374 on Friday.

“After largely being confined to range trading against the major European currencies in recent weeks, the dollar has broken down,” said Marc Chandler, of Brown Brothers Harriman.

The British pound also gained 2.1% vs. the greenback, while the Swiss franc was up 1.7%.

However, “We suspect that U.S. fundamentals have not deteriorated as much as the price action is prompting the dollar bears to suggest,” Chandler said.

“Instead, we would regard the greenback’s decline as largely technical in nature, relating to profit-taking by momentum traders on the second-half dollar rally ahead of the end of the year,” he concluded.

Analysts awaited today’s interest rate decision from the Fed, with most expecting a cut of the benchmark by half a point to 0.5%, although some are

Dollar falls against the euro, gains against the yen… Hope of bailout for U.S. carmakers boosts sentiment… Risk aversion likely to remain for some time…

The dollar fell against the euro on Monday as talk of an imminent bailout deal for the three U.S. automakers boosted stocks in Europe and Asia and helped to quell extreme levels of risk aversion.

The rise of 5 percent in benchmark indexes outside the U.S. sent the low-yielding Japanese yen and U.S. dollar lower against the Australian dollar, sterling and other currencies perceived in the market to have higher risk.

Analysts said expectations that a rescue of the “Big Three” U.S. automakers will materialize, along with more stimulus measures from governments around the world was helping to calm a recent sell-off in risky assets which has send yields on three-month Treasury bills to near zero.

The “U.S. dollar is sharply lower

A batch of interesting video clips about the election of Barack Obama and the unfolding financial crisis has appeared over the past few days as all and sundry are attempting to make sense of a rather murky picture. A number of clips that have attracted my attention are shared below.

Firstly, back to basics with a rudimentary explanation by Enspire of how the mortgage crisis came about. (Click here in case you missed Enspire’s previous video, “Understanding the financial crisis”.)

Enspire Learning: The mortgage banking meltdown

In the currency market, the dollar moved higher again vs. the euro. Late Monday, the euro was trading at $1.2641 vs. $1.2751 on Friday. “There is still strong underlying demand for the U.S. dollar,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

Is it sustainable, though? “The major force in the capital markets, especially in the foreign exchange market, is the deleveraging process,” Chandler said. “And the deleveraging process is one in which they [investors] have to buy the dollar they previously sold.”

The buck held up despite data showing that U.S. manufacturing firms experienced the worst level of output in 26 years. The Institute for Supply Management said its factory index fell to 38.9%, the lowest since 1982, from 43.5% in September. That was far below conomists’ expectations that the index would decline to 41.5%.

But then, the news from across the pond isn’t any better. The closely-watched