Over the past 24 hours, it has become increasingly clear that the bear market rally in currencies and equities is over. U.S. stocks plummeted close to 4 percent sending investors back into the safety of the U.S. dollar and Japanese Yen. Renewed concerns about the U.S. economy was the primary catalyst for the risk aversion but repatriation also added to the upside pressure in the two lowest yielding currencies. With 24 hours to go before the end of the quarter for most U.S. companies and the end of the fiscal year for the Japanese, repatriation has been particularly strong as companies bring money home to window dress their balance sheets. The U.S. dollar strengthened against every major currency except for the Japanese Yen.

It is a dollar story in the foreign exchange market today as the greenback rises against every major currency. Although earlier risk aversion contributed to the strength of the US dollar, the underperformance of the Japanese Yen suggests that revenge of the low yielders is not the theme in the currency market. Since we are still waiting on the economic stimulus package, the market has shifted its focus away from politics and back onto economics. The comments about sovereign debt ratings by ratings agency Moody have spooked currency traders.

To have your credit rating downgraded means higher costs of borrowing. The Euro is slipping as we are seeing an exodus out of Spanish bonds because some global funds are mandated to invest only in AAA debt.