The U.S. dollar made gains against the euro as the currency lost its luster because the deteriorating market conditions and sent related exchange traded funds (ETFs) down.

Investors are simply not taking any risks and European banks are considering yet another rate cut, by about 0.75% as early as Thursday, reports GCI Financial for Daily Markets. Next year is not expected to get any smoother, so the European Central Bank is ready to take action despite the earlier two rate cuts in October.

The Japanese yen made advances against the U.S. dollar recently and the Japanese economy and currency had a foothold up until Lehman Brothers failed. Interest rates in Japan are already at historic lows and corporate profits are under pressure, so these measures will reflect in any movements within the global economy as well.

The British pound has been falling sharply, along with the Chinese yuan. The European Union believes that the United Kingdom may be better off if they join the rest of the union and trade in the euro, because of the favorable performance of the euro in this climate. The yuan closed at the limit of its daily trading band and is causing the People’s Bank of China to adjust the trading band in the near future.

• CurrencyShares British Pound (FXB): down 22.6% year-to-date

• CurrencyShares Japanese Yen (FXY): up 19.4% year-to-date

• iPath EUR/USD ETN (ERO): down 10.9% year-to-date

• WisdomTree Chinese Yuan Fund (CYB): down 2.5% since inception

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Tags: Asia, British Pound, China, Chinese Yuan, Currency ETFs, CYB, ERO, Euro, Europe, FXB, FXY, Japan, Japanese Yen, United Kingdom