On Monday the US dollar was king as sentiment turned against the euro over concerns the Euro-zone is financially fragile and Greece’s economic problems are just the tip of the iceberg. On Tuesday the euro ruled again as it appreciated against the US dollar. The euro resumed strengthening because Greece is saying it will not need European Union financial assistance to manage its budget deficit.

In fact, Greece is reporting that the nation is ahead of its four-year deficit reduction plan. The euro responded by advancing the most it has in 7 months against the dollar. The euro was at US$1.3770. Analysts are saying the gain may be extended if the reports about Greece prove to be accurate.  The dollar fell 1.26 percent against the euro.

The Greece drama is not over yet by any means. Greece has been told by the European Union finance ministers who are meeting this week that the government must do more to reduce its budget deficit.  Germany is adamant that Greece needs to solve its own budget problems through fiscal policy tightening and restraint.

The US dollar fell against many other currencies as oil prices rose again. In fact, oil rose over 4 percent to reach $77.28 a barrel for March deliveries.  The dollar weakened against the Canadian dollar to C$1.0449.

The US dollar was about the same against the Japanese yen at 90.15 yen. The Canadian dollar rose to 86.30 yen per loonie. The Canadian dollar fell against the euro to C$1.4376.

The Canadian economy is improving steadily now. December factory sales for December were at their highest level compared to the last 12 months. Canada is taking action in the mortgage industry to insure that prices remain reasonable. The Canadian finance minister announced that mortgage industry rules will tighten in anticipation of rising interest rates.

The UK pound weakened to $1.5684 against the US dollar. A national sales tax increase has boosted the inflation rate recorded for January to 3.5 percent compared to a year earlier. The central bank does not expect the inflation rate to remain this high though prices were rising in several industries. These industries include alcohol, tobacco, transportation, and hospitality.

The Mexican peso strengthened to 12.8425 pesos per US dollar. The peso has now increased for the last 4 days. Today’s rise was attributed to speculation that Mexican bonds may be added to the Citigroup World Government Bond Index. The peso is putting in a strong showing in 2010 so far having risen by 1.9 percent year-to-date.

The Argentinean peso has weakened to a record low at 3.8751 pesos per US dollar. The government is depreciating the peso to improve export tax revenues. Investors are buying US dollars. The government of Argentina is attempting to restructure $20 billion of defaulted debt. A weaker peso will result in peso gains on the foreign currency reserves account at the central bank of Argentina. In the last 12 months the peso has weakened by 9.4 percent over the last twelve months.

Peru’s central bank will most likely raise its benchmark interest rate to 4.75 percent before the end of the year. The goal is to control inflation. The Peru sol rose to 2.8483 sols per US dollar.

It is apparent that fears of inflation are beginning to be justified. Economists have predicted for months that inflation will be difficult to control as economic stimulus programs begin to unwind.