The risk is that the dollar becomes stronger if there is any hint that the economy remains buoyant and the markets start to price in a greater probability of another rate hike in March.

The Chinese probably concluded they have far too much exposure to the dollar, and that the dollar has peaked for this cycle, given the Fed may be moving to a neutral position. Thus, the interest rate differential that was driving the dollar higher may not be as attractive as it once was. The risk is now the dollar may begin to depreciate. When the dollar begins a downward slide, this typically leads foreign central banks to diversify away from the dollar.

I think there is risk in the market. If there is weakening in the economy, then an earnings recovery gets pushed out further into 2002.

There's more upside risk on the dollar as the rate differential still attracts buyers. The U.S. economy is on a firm footing and the Fed may raise rates at least twice by March.

We think that with the risk of surprisingly tight U.S. monetary policy diminishing as the U.S. economy decelerates, and with the peso strong, the scales are tipped to a 50bp east at the January meeting.

If the Fed is to achieve its objective of slowing the economy, they must consider the risk that their inaction on rates could spur growth before the economy has had a chance to truly slow,