The euro rose this week the most and could extend gains next week after successful securities auctions by indebted euro zone members calmed fears of a credit crisis in the region.Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York said: "We're at a bit of a pivot point but the same momentum continues. There is positive momentum from several countries' strong bond auctions. We'd need to see something new come out" to change direction."
Oil prices were weak after China lifted lenders' reserve rate requirements by 50 basis points to tame inflation.Commerzbank's Eugen Weinberg said: "It was widely expected (China) would try to tighten the monetary base further. It's not actually surprising that they are trying to take steam out of the economy. The market was
pricing in the perfect world, and although not unexpected this might change sentiment and provoke profit-taking."
The Nikkei average were down in a heavy trade when a surprisingly weak settlement of options for January and a slightly stronger yen against the dollar triggered profit-taking.The benchmark Nikkei 225 ended fell 90.72 points,to 10,499.04.
The S&P 500 Index ended high with a banks-led rally amid healthy volume after encouraging financial results from JPMorgan. Strength in financial stocks helped offset economic reports that showed soft December retail sales and consumer sentiment dented by rising gasoline prices.Jim Awad, managing director at Zephyr Management in New York said: "On balance, with supporting prices and in spite of mixed economic data, there is expectation of a strong earnings season.
European shares ended lower after a fresh tightening in Chinese monetary policy hit investor risk appetite,although more positive US economic and earnings data had helped pare losses by the close. Miners were among the worst hit after China raised its bank reserve requirements.Philip Isherwood, head of equity strategy at Evolution Securities said: "There's been good and bad economic news this week, but we still believe the economic story is one of a developing strength. I fully admit inflation worries are there in emerging markets, such as China, and there are concerns over the euro zone periphery, but my own view is that the cycle will be driven by the positive message from the corporate sector."
The US Treasury Market closed on a negative note before a government report that economists said would show the US cost of living increased the most in 16 months. Treasuries rose yesterday after the central bank purchased more of the securities than traders expected.Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh said: “If we saw not only a rise in the headline rate but also signs that the core rate is rising as well, that would be bad news for Treasuries.”
German government bonds declined as investors increased bets that the European Central Bank may raise interest rates this year as inflation accelerates.
Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich said: “The market is taking Trichet seriously. He’s watching closely, that’s his job and it shouldn’t surprise anybody. The market is responding to the inflation rhetoric, though it might be a bit overdone.”
Gold prices dropped when China tightened bank reserves to rein in inflation and as safe-haven demand faded on a better economic outlook.Frank McGhee, head precious metals trader at Integrated Brokerage Services said: "China's move is perceived (to show) that the country is capable of slowing down the level of inflation, and that takes some of the run of gold and industrial metals such as silver, platinum and palladium."

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