Are we seeing a change in fortunes for the much maligned greenback? It would certainly seem so. The US currency has climbed to a one week high against the euro and the yen. And the G8 leaders are expected to signal support for the dollar at their meeting today.

How did this happen? The dollar was heading for a drubbing against the euro last week. Currency expert Chuck Butler believes that Fed chief Ben Bernanke sent ECB chief Jean-Claude Trichet a memo pleading with him to help the dollar out by not signaling further rate hikes in Europe.

Did Trichet and Bernanke cosy up before last week’s ECB move. We don’t know. Whatever happened, the dollar has been given breathing space… for now. More from Chuck:

The European Central Bank (ECB) did indeedly do raise rates 25 BPS and say that it was inflation running high that caused them to raise rates… And about the same time, the Jobs Jamboree posted a job loss for June of 62K, and the storm clouds were forming… But then, ECB President pulled a rabbit out of his hat and said… “Starting from here, I have no Bias”… Folks, that’s just as good as saying, “here’s your rate hike, don’t expect another one”… No hawkish tone… No pointing out how inflation pressures are causing the ECB problems with their mandate to provide price stability… No nothing, nada, zilch, zero, and the euro was sent to the woodshed… And the whippin’ was awful!

So, what happened here? Ahhh grasshopper, this is the “Beware the Thin Markets” conspiracy stuff I was talking about on Thursday morning. I believe in my heart of hearts that Big Ben Bernanke and Treasury Sec. Paulson, sent ECB President, Trichet, a memo. The memo said… “please help us out here… You are going to raise rates and talk hawkish on the same day we are going to post a huge negative jobs number, thus telling the markets the Fed is NOT going to raise rates soon… Could you please not sound so hawkish? That would help us greatly… Thanks, Big Ben and Hank”

Trichet “got the message”… That’s how I truly believe the day went. So, we are sitting with the euro almost 3-cents lower than on Thursday morning when I signed off… U-G-L-Y… With the Big Dog euro getting whipped, the rest of the currencies suffered as well. Not much else to say about all that…

So, let’s get back to basics… The fundamentals of the U.S. economy continue to be rotten… The Jobs Jamboree posted a net negative jobs of 62K, and the previous month’s job losses were revised up to negative -62K (from -49K)… The Bureau of Labor Statistics (BLS) did their part, just as I suspected they would on Thursday, by adding 177K jobs with their Birth / Death Model… They even had the gall to add 29K Construction jobs! Geez Louise, Serenity Now! This is getting preposterous! When will this all come back to bite the BLS? Probably not for awhile, as they will want the dust to settle for some time before they come clean… But for the record… The job losses in June would have been -239K, added to May’s -279K, if there were no Birth / Death Model.

The data cupboard is empty and needs restocking… But… Did you hear this little ditty about the Fed Reserve? The Fed is going to be faced with a general inspection by the IMF… The story printed on Wednesday last week, but you didn’t hear about it on your favorite cable news station, now did you? Here’s the skinny… Officials with the International Monetary Fund (IMF) have informed Bernanke about a plan that would have been unheard-of in the past: a general examination of the US financial system. The IMF’s board of directors has ruled that a so-called Financial Sector Assessment Program (FSAP) is to be carried out in the United States. It is nothing less than an X-ray of the entire US financial system. No Fed chief in U.S. history has been forced to submit to the kind of humiliation that Ben Bernanke is facing.

I wonder what the IMF will say about those “wonderfully performing bonds” that the Fed took in the Bear Stearns bailout? The writer of the story, Gabor Steingart, had this great line, that sounds like it came right out of the Pfennig… Here it is… “Inflation is going up and up, and this year’s average will likely top 4 percent. But this time Mr. Dollar is also Mr. Powerless. He can raise interest rates in the fall, or he can pray, which would probably be the better choice. At least prayer would not prevent the US economy from growing, a highly likely outcome if interest rates go up.”

So, the Fed has to deal with that embarrassing “audit” from the IMF, while the economy is melting down… I truly believe that Consumers are being beaten around the head and shoulders with high gasoline and food prices, their house values falling, credit as tight as a drum, the stock market going to hell in a hand basket, and now job losses for 6 consecutive months… This all sounds like the late 70’s early 80’s to me… The only thing missing are interest rates as high as the sky!

But, the “boys” have successfully diverted the markets attention away from all of this rotten stuff for now… And they got their brother-in-arms, Trichet to play along with them for now too…