The dollar is down relative to the Euro, because the further deterioration in the credit markets makes Fed rate hikes unlikely, though the US dollar has strengthened against the Canadian dollar, because oil has been down so much recently, which means that the Canadian trade surplus to the US, they are the US's largest external oil supplier.
It looks to me like the financial markets are continuing their slow motion car wreck.
Banks are tightening business loans and commercial paper, decreasing total lending by 3%, and requiring much higher interest rates to account for the uncertainty.
As to what foreign investors are doing, I can't speak for all of them, but Russia has cut investment in Fannie and Freddie by 50%, and the international monetary fund sees no light at the end of the tunnel on the housing crash.
The result is fairly straightforward, much tighter money, particularly for entities like Lehman, which has seen its borrowing costs skyrocket. They are now 7.7%, 6 months ago they were 5.2% for a 5 year bond.
This is a 4.2% premium US Treasury notes, which is about double the number in early January.
In energy, oil is up about $1/bbl today, largely on Iran concerns, but retail gasoline prices have continued to fall.
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