The euro is falling to the U.S. dollar in currency trading on the FX market today. The euro is gaining in forex trading as China continues to say that it supports the dollar as the global reserve currency. And China does support the dollar. For now. (What China is doing for the long term is another story altogether.) For the short-term, China's continued use of the dollar will continue to provide limited support for the dollar in currency trading. 

Another issue affecting the euro in forex trading is economic data. Even though German employment saw some improvement, overall the euro zone is looking pretty grim. Yesterday's enthusiastic rally is being overshadowed as forex traders moderate their optimism. GFT's Boris Schlossberg reports in FX360 on the latest euro zone unemployment issues:

EZ unemployment rose to 9.5% from 9.3% projected as conditions in southern Europe deteriorated further. As we’ve stated before the risk of EZ unemployment rolls rising into the second half of 2009 remains quite high especially if German efforts at “short work week” arrangements begin to fail. Many analysts now expect the EZ rate to climb into double digits mirroring the labor conditions in US.

This renewed concern about the economy means that the U.S. dollar is once again ascendant in currency trading as a safe haven.

The Japanese yen is dropping against the euro in forex trading on the currency market this morning as a change appears to be taking place in the global economy. The yen, known as a safe haven currency, is being abandoned as forex traders look for higher yields in riskier currencies.

One of the main drivers behind the weakness of the yen is the fact that China is expanding its manufacturing for the fourth month in a row. This pick-up in activity bodes well for the global economy, and may be an indicator that the recession is coming to a close.

The Japanese yen is also down against the U.S. dollar and the Swiss franc in currency trading.