Currencies and equities have strengthened across the board suggesting that risk appetite may be improving. The dollar, which has been a refuge for safe haven flows, fell against all of the major currencies except for the Japanese Yen. In fact, the rally in USD/JPY has been voracious with the currency pair rising 2.5 percent to an 11 week high. The move today has been driven by a variety of factors, none of which in our opinion are meaningful enough to sustain the rally.

President Obama inherits a very troubled economy and he certainly has his work cut out for him over the next few years. However brighter times may lie ahead for US stocks based upon the performance of the Dow in the first 100 days on a President’s term.

Dollar rallied strongly on the opening day of the first full working week of the year as enthusiasm over President elect Obama stimulus package pushed the unit higher against the yen while the euro suffered a 300 point loss on worries over the burgeoning Italian bond scandal. According to the Independent in UK , Italian municipalities may face as much as $35 Billion in losses over a financing scheme gone wrong, sold to the them by major investment banks such as UBS and Deutsche Bank. The Italian authorities are considering the possibility of suing the principal market makers or misrepresenting the risks to the municipal investors in these complex over the counter deals.