[Calxy]

The USD gained some ground overnight as Sterling slumped to a 10 day low under 1.6300 on word of a large UK bank having difficulty raising capital and not meeting the FSA's capital requirements. Following BoE King's comment this week that UK rates could be eased further, there's even talk that GBP is a new funding currency, having dipped to 10 year lows against high yielders AUD and NZD. That's quite a change from the pound's traditional allure as a high-yielding safe haven currency. Euro/dollar slipped with Asian equities, testing 1.4650 support, and EU Monetary Affairs Commissioner Almunia's comment that Europe wouldn't want China to diversify too much into Euro also weighed on Euro/dollar. Dollar/yen has remained over 91 overnight after more comments from incoming Japan FinMin Fujii that he does not want to be portrayed as "a supporter of a strong yen." The Dow has recovered from overnight futures losses and Euro/dollar is steadying near 1.4700. Next week's FOMC meeting means there's a blackout now for Fedspeak, but Bernanke's comment this week was key: “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time.” Market interpretation of this statement is that as long as there's sizeable slack in the economy, which is likely given unemployment rate is heading to 10% and capacity utilization near record lows, the Fed Chairman won't consider a rate hike. So for now, low rates and improving global and US economic news means a still weaker USD.