Despite dismal fundamentals, the US dollar rally continues to dominate as it remains one of the strongest currencies, second only to the Japanese yen.

Just when we thought that risk sentiment was improving a bit, flight-to-safety led to huge gains for the US dollar and Treasuries and losses for stocks and commodities on Tuesday.

The US dollar continues to dominate in the currency markets, this time helped by comments by Federal Reserve Chairman Bernanke as he supported the introduction of another fiscal stimulus package this year.

Will we see a rebound next week?

US fundamentals are having very little bearing on the greenback as risk trends dominate.

Despite all of the issues facing the US economy, we’ve seen that the US dollar continues to gain on safe haven flows, similar to what we see with gold and US Treasuries.

The US dollar ended the day lower versus most of the majors, though the bulk of the action came overnight in anticipation of the US government’s big recapitalization plan announcement.

An improvement in investor sentiment proved to be to the detriment of the US dollar.

The meeting of European Union members on Sunday will be key to where EUR/USD goes next.

Flight-to-safety triggered major gains for the US dollar on Friday, as volatility remained exceptionally high in the market.