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Data Caps USD Gains

The greenback posted its largest weekly gain on a trade-weighted basis in a month despite relinquishing its grip in Friday trading. Nevertheless, lingering fears over credit conditions and the credibility of banks' balance sheets continue to plague the currency. Accordingly, the currency market will continue to be closely correlated with equity market moves - particularly the trajectory of the carry trade pairs, amid times of heightened volatility.

Economic data released earlier in the session derailed the dollar's rebound against the majors, pushing it toward session lows versus the euro and sterling.

Fed Board Member Kroszner downplayed the prospects for another FOMC rate cut over the coming year, saying "the current stance of monetary policy should help the economy weather the rough patch during the next year, with growth then likely to return to its longer-run sustainable rate". Fed members have been tempering market expectations for another 25-basis point rate cut at the December FOMC meeting particularly after market sentiment in October fully discounted an ease despite the actual decision being much closer than expectations suggested.

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