Another day, another dollar (going down forever.) The reflation trade is on, so on, baby, kick-started by Don Kohn's suggestion last night that the output gap is wider than the Grand Canyon and another wave of better than expected earnings, led by Intel after last night's close. JP Morgan announces at noon London today, kicking off a busy week of kleptocrats' banks' earnings.

But while equities are performing strongly, the real story of the day thus far has onc again been the dollar. Not only has EUR/USD made a new high for the year above 1.49, but now even oil has broken out, suggesting that a sinking dollar lifts all boats.

While the dollar is traditionally weak in Q4 as FX reserve managers top up their non-US$ holdings (a trend that should be in full effect this year as Voldy and co. scoop up zillions in fresh reserves via intervention), it's hard to shake the feeling that the Obama administration is secretly delighted with the demis of the buck. To date, there have been no meaningful adverse effects of a dollar decline- Treasury auctions are still going swimmingly, and oil prices have been in a range for the past several months.

Sure, they've had to field the odd angry phone call from the Europeans, but that's pretty small potatoes to date. Still...it's not hard to see a scenario where the Eurogroup (and potentially the ECB) start hammering more forcefully on the Americans about dollar weakness and the Chinese about euro strength.

Yet while Macro Man has considerable sympathy for the view that China needs to quit taking the piss when it comes to its and others' currencies, he finds it less easy to swallow the Europeans' viewpoint vis-a-vis the dollar. A few charts will explain why.

The first chart below shows China's trade data, the September edition of which was released overnight. Gratifyingly for the green shoots brigade, imports were substantially stronger than expected, propelling a modestly lower trade surplus. Observe, however, how the proud owner of the world's largest trade surplus managed to safeguard its monthly positive trade reading throughout the entire financial crisis- helped, no doubt, by the decision to arrest a strengthening of the RMB versus the USD last July.

Now, it's certainly the case that China has been an active buyer of euros in the open market, and that that activity, when combined with their persistently large USD/RMB intervention, has exerted an upward pressure on EUR/RMB. So Europe has a beef, right? Well, maybe, buit certainly one no larger than that of the Yanks'. The chart below shows the difference between China's trade surplus with the US and its trade surplus with Europe.