Both the Australian dollar and the New Zealand dollar weakened slightly on holiday trading

The US dollar rose against a basket of currencies after a better than expected jobless claims report. The number of US workers filing new claims for jobless benefits fell on a 4 week average to 552,250 from 558,000 which on the surface looks promising but the number of people remaining on the benefits roll are at the highest level since 1982. In other news, US mortgage applications remain at 5 year highs as mortgage homeowners rush to take advantage of low refinancing rates. Market participants expect more pain in 2009 as the worst recession in 80 years takes its toll on the global economy.

The euro weakened against the dollar as the year ends on a down note for the single unit. 2008 is the first year since 2005 the euro weakened against the dollar at -4.3%. The euro is expected to see support due to the contrasting monetary policies by the US central bank (aggressively easing) and the ECB (cautious holding pattern).

The Japanese yen will finish the year up about 19% against the dollar as investors unwound their carry trades.

The Great British pound fell 27% against the dollar for the year, the biggest decline since the gold standard was abandoned in 1971. Investors are bracing for more interest cuts from the BOE as the British economy continues to falter in the global recession.

The Canadian dollar traded stronger against the greenback this morning but will finish about 19% down for the year sharply contrasting 2007’s rise of 17.4%. Oil prices peaked to near $150/barrel only to fall to below $40/barrel, and the loonie followed suit. Market participants are expecting further loonie weakness as commodity prices are expected to fall on weaker global demand.

Both the Australian dollar and the New Zealand dollar weakened slightly on holiday trading. The Aussie dollar will finish the year about 21% down against the greenback and is expected to weaken further as the local economy is likely to enter into a recession for the first time in 17 years. Kiwi has fallen almost 25% this year, its worst annual performance since 1985. Investors expect the kiwi to remain under pressure as commodity prices fall and interest rates will continue to fall.

The Mexican peso weakened against the dollar after the US continues to release more grim economic data.