the

The U.S. Dollar was mixed in light trading at the close in an unusual day as the normal correlations between the Dollar, gold and equities at times were not working. The lack of major U.S. economic reports this week is still influencing the trade although this will change with Thursday’s Weekly Initial Jobs Claims Report.

The U.S. Dollar closed out the month of January sharply higher as aggressive buyers helped the Greenback surge to the upside following Friday morning’s better than expected U.S. GDP report. The report which blew out forecasts encouraged traders to buy with both hands as investor sentiment turned more optimistic toward a strong U.S. economic recovery.

The USD JPY reversed its four day rally as traders sought safety in lower yielding assets following an announcement by President Obama to curb trading at financial institutions. The immediate reaction was to sell higher risk assets after Obama called for a reduction in the size and trading activities of financial institutions.

U.S. equity markets closed lower as investors dumped higher risk assets, but buyers once again stepped in on the intra-day dip. Wednesday’s weakness started on the Shanghai Exchange overnight after China asked banks to stop lending for the rest of the month. This sent a signal to traders that the easy money environment would be coming to a close.

The lack of economic reports today is shifting the focus by U.S. equity traders to the U.S. Dollar. The prospect of the Fed keeping interest rates low for a “prolonged period” of time is helping to boost stock prices overnight as investors continue to treat the Dollar as a carry currency.

December Gold surged to a new all-time high after the Reserve Bank of India purchased 200 metric tons of gold from the International Monetary Fund. The purchase was worth about $6.7 billion. Traders at first were hesitant to drive this market higher until it became clear that this transaction could be the start of additional buying by other central banks.

December S&P and NASDAQ stock index futures finished lower for the month while the December Dow eked out a small gain. The closing price reversal tops in the S&P and NASDAQ indicate that the selling is greater than the buying at current levels and set up the possibility for a 2 to 3 month decline.

At the midsession, it appeared the U.S. Dollar was in a position to reverse today’s trend and finish higher for the day, but bullish news from Intel after the close helped drive up demand for higher risk assets.