The rapid readjustment in the value of the greenback against other currencies is not only driving commodities lower, but forcing a quite dramatic change in expectations: no longer is it the easy bet to sell the US dollar and buy commodities, such as copper and oil, or the shares in commodity producing companies.
It's a question of what will be the telling factor: the dramatic fall in commodity prices on Friday or Wall Street's big rise.
Copper and gold lost heavily on Friday: copper fell 2.5% on Friday to cap its worst week in 15 months while gold shed 1.5% Friday to complete its longest fall since 2006.
Oil fell another $US5 a barrel, despite Russian fighting around Georgia and South Ossetia (and near a major pipeline).
In Moscow the fighting hit hard with Russia's main RTS index down 6.5% to a 14 month low. Shares in Rosneft, Russia's largest oil firm, the gas export monopoly Gazprom and car maker AvtoVAZ all fell sharply on Friday while the rouble dropped 1%.
Oil prices could be boosted today if there's news of a strike against a one million barrel a day pipeline passing through southern Georgia to Turkey from the Black Sea oil fields.
So while the bulls will be looking for a continuation of gains from Wall Street's solid week last week, the bears will be crunching commodity stocks, which are down 15% from their peak in the Australian market,
Friday saw the Standard & Poor's 500 add 30.25 points, or 2.4%, to 1,296.32, the Dow 302.89, or 2.7%, to 11,734.32 and Nasdaq 58.37 points, or 2.5%, to 2,414.10. The S&P 500 added 2.9% over the week, the Dow 3.6% and Nasdaq climbed 4.5%.
After falling to a 30 month low on July 15, the S&P 500 has risen 6.7%: that's still down 12% this year so far, but analysts are wondering if it's a re-run of the March to mid-May rebound, or a new move.
Financial and consumer-discretionary stocks, which were two of the three main losers so far this year, have led this rebound, just as they helped the March-May rally (along with energy and commodity stocks).
Oil's fourth drop in five weeks is helping change US sentiment, while US petrol prices are now down to just over $US3.83 a gallon, compared to the all time record of $US4.114 a gallon on July 17. The latest price is the lowest since late May.
The shares of troubled car giants, Ford and General Motors, plus the shares of major US airlines, have all recovered ground.
The other mortgage twin, Fannie Mae fell 9.1% on Friday to $US9.05 after reporting a second-quarter net loss of $US2.3 billion, or $US2.54 a share.
The dividend will be cut to 5c from 35c a share and Fannie Mae has joined Freddie Mac (which reported a bigger than expected $US821 million loss for the second quarter) in raising fees to its customers. Fannie Mae is going to cut back sharply on financing so-called AltA mortgages (which are like our low-doc loans).
They were 11% of its portfolio in 2007 and the move will mean a curtailment of financing of investor loans.
Fannie, which owns or insures about 25% of all US mortgages, provided an extra $US3.7 billion to cover home loan troubles. The company forecast a "significant'' increase in reserves for the rest of the year as the housing market deteriorates and prices continue to drop.
In Europe, shares caught the US optimism, rising Friday and sending the Dow Jones Stoxx 600 Index to a five-week high, as the falls in oil and metal prices pushed the rally in airlines, carmakers and retailers higher.
The Stoxx 600 Index rose 0.8% on Friday to take the week's rise to 3.2%.
National market indexes rose in 13 of the 18 western European markets. France's CAC rose 0.8%, while Germany's DAX added 0.3%, and London's FTSE 100 was up 0.2%.
Asia-Pacific shares fell on Friday but should bounce back after Wall Street's strong rise on Friday night.
Industrial shares outweigh resource stocks in importance in most markets, except Australia.
But concerns about what China will be doing after the games finish will weigh on minds and for that reason lower commodity prices will be a drag, especially in Australia.
The MSCI Asia Pacific Index fell 2.7% to 127.11 last week, extending the previous week's 1.8% fall. Japan's Nikkei rose over the week and the local market was up 1%, but most other Asian markets fell, especially China which was very weak.
China's CSI 300 Index fell a large 8.8% over the week for the odd reason that investors were disappointed the government didn't announce post-games policy moves long rumoured to be under discussion.
But we have already seen some of those: increased rebates for textile exports for example and a switch to faster growth from a policy of restraining growth and keeping a tight monetary policy.
What many outside commentators have forgotten is that there will be a huge rebuilding program in Sichuan province announced in the next few months which will form a centrepiece of post games spending.
For much of the past six years Beijing has commanded the attention, but now the damaged parts of Sichuan will get billions and billions of dollars of spending lavished upon it to help close down unrest in the wake of May's earthquake.
The CSI 300 Index has now fallen by 51% this year.
China's CSI 300 Index extended its fall this year to 51%.
The Shanghai composite index has halved in value so far this year and plunged 57.5% since its peak in October 2007 to close at 2,605.72.
The MSCI Asian index is off a total of 19.4% so far this year, with much of the losses attributable to falls in Japan, China and Australia.
The region's fall is around 50% more than the drop in the S&P 500 so far this year and yet the US is a basket case, compared to the still growing economies of Asia (with the exception of Japan).
Australian shares rose weakly. The ASX 200 index closed 0.1% higher at 4,986.20; the Aussie dollar was weaker, hitting its lowest level since February.
Westpac shares rose 1.9% Friday after revealing that it had escaped the worst of the crunch and forecast a 6%-8% rise in earnings for the year to September.
Other banks were mostly lower. The ANZ Bank, which said after trading that it would lower its fixed mortgage rates by up to 0.50%, lost 3.6%, to $17.35.
The Commonwealth Bank lost 1.2% ahead of its results this week, while National Australia Bank slid 2.4%. St George Bank added 13c to $29.42. It updates the market tomorrow.
CSL rose 2.9% after US regulators approved its flu vaccine.
