General : The US Dollar was mixed in early trading Monday: lower against the Euro and Japanese Yen but higher vs. the British Pound and Swiss Franc. Liquidation of so-called carry trades appears to be running its course, while higher interest rates in Europe and better-than-expected economic news from Japan has pushed the Euro and Yen higher.

For the past several years, investors borrowing, primarily, Japanese Yen and, to a lesser degree, Swiss Francs at relatively low interest rates then investing the proceeds in instruments denominated in higher-yielding currencies had strengthened those higher-yielding currencies. However, two weeks ago, concerns over higher rates in Japan and corresponding strength in the Yen coupled with a sell-off in some equity markets led a number of investors to begin liquidating their carry trades. The markets, along with the Dollar and Euro, fell sharply.

Rather than generating a worldwide financial crisis, however (a la 1998), with the extraordinary liquidity available today, investors took the sell-off as just a market correction, considering the lower-priced markets a buying opportunity.

Japanese investors, especially, took the sell-off as a buying opportunity, taking advantage of the stronger Yen to move funds into higher-yielding investments abroad.

Last week, the European Central Bank raised its base lending rate 25 basis points to 3.75 percent. And Monday, ECB President Jean-Claude Trichet reiterated his belief in global economic strength and continued worries about inflation.

On Monday, the Japanese reported a number of pieces of positive economic news, which allowed the Yen to recoup some of its losses: the Japanese economy expanded at a better-than-previously-expected pace in the fourth quarter (growing at an annual rate of 5.5 percent), Japanese exports in January were fifty percent above year-earlier levels, and consumer confidence rose to a three-month high.

The Dollar found some strength in Fridays employment report, with the unemployment falling to 4.5 percent and the economy generating 97,000 non-agricultural jobs in February.

This week, traders will key off Tuesdays retail sales report and Fridays consumer price report.

We believe the Dollar will lose ground modestly this week.

Euro : Germanys IfW Economic Research Institute raised its estimate of 2007 German growth to 2.8 percent, up from its December estimate of 2.1-percent growth. We look for the Euro to move up to 1.3200 this week. (Current level: 1.3161)

Swiss Franc : Unwinding carry trades could be somewhat negative for the Swiss Franc. We would buy the Euro while selling Swiss Francs. (Current level vs. the Dollar 1.2261)

British Pound : With the highest interest rates among major industrial nations, the Pound benefits from carry trades. UK producer output prices rose 0.3 percent in February, below Januarys increase of 0.4 percent, but above economists estimates of 0.2 percent. However, Britains National Institute for Economic and Social Research said UK growth in the quarter ending February 28 slowed to 0.5 percent, from 0.7-percent growth in the quarter ending November 30. We look for support for the Pound at 1.9200, with resistance at 1.9350. (Current level: 1.9302)

Japanese Yen : We would buy Yen at 117.00. (Current level: 117.64)

The information contained in this report has been obtained from sources, which we believe to be reliable, but we do not guarantee its accuracy, adequacy or completeness. Leader Investments, Inc., is not responsible for any errors or omissions or for the results obtained from the use of such information. There is a substantial risk of loss from currency trading, and you should consider whether such trading is suitable for you in light of your financial condition. Past results are not necessarily indicative of future results.

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