- The G7 finance ministers said that foreign exchange rates should reflect fundamentals, failing to specifically mention the USD, JPY or EUR. The group added that world economic growth was now threatened by high oil prices, U.S. housing market woes and financial market uncertainties that were expected to persist "for some time." The G7 increased pressure on China to allow faster appreciation of the CNY, with France's Finance Minister saying that the G7's forceful language on the CNY would help relieve some of the upward pressure on the EUR. The word "recession" was nowhere to be found in official statements from the G7. Analysts pointed out that the communique issued by the G7 on Friday was far more vague than previous commentary. It said nothing about the economies of Britain, Canada or Japan.

- Bank of Canada governor Dodge, in his strongest remarks yet on CAD strength, said that CAD gains are speculative and not reflective of a strong Canadian economy or weak USD. "The recent round of appreciation has been abnormally quick and doesn't seem to be related to the domestic factors which would normally lead to that sort of appreciation," he said.

- Aussie Q3 Producer Price Inflation higher than expected: (AU Q3 PPI QOQ: 1.1% V 0.9% expected, 1.0% prior; YOY: 2.4% V 2.1% expected, 2.3% prior) Analysts noted a big jump in real estate costs, which suggests house prices are rising again. Main focus remains CPI data to be released on 10/23, with several analysts downplaying the correlation between PPI and CPI data. Futures trading shows that markets are pricing in a 45% chance of a RBA rate hike to 6.75% at November meeting vs. 41% priced in before today's Q3 PPI data.

- Forex: Traders continue to reverse carry trades amid heavy losses on Asian stock markets. The lack of major U.S. economic data this week may amplify the impact equity markets have on currencies, and this pattern was evident in today's Asian session. EUR/USD hit a new record high above 1.4345, while the AUD outperformed the NZD. AUD/USD and NZD/USD recovered some losses towards the end of the morning session after the S&P futures contract rebounded from session lows. AUD/USD found solid support near 0.8840, while NZD/USD stayed above 0.7400. Between 17:00 ET and 23:10 ET: USD/JPY -0.48%, EUR/JPY -0.42%, NZD/AUD -0.33%, USD/CHF -0.13%, NZD/JPY -1.05%, GBP/USD -0.12%, USD/Asia generally traded higher, while USD index is down -0.22%

- Equities: At 22:58 ET Japan's Nikkei is lower by -3.20%, Australia's ASX is down by -2.04% and South Korea's KOSPI is lower by -3.64%. China's benchmark index rebounded from heavy early selling, currently down -1.13%. Poor earnings results from Bank of America and Wachovia led to increased selling pressure on Asian financials, while bargain hunting among resource stocks limited further downside. The Nikkei is experiencing a broad-based decline as decliners lead gainers by a ratio of 1,611 to 76.

- Commodities: As widely expected, spot gold started its corrective pullback after strong gains over recent sessions. Positioning data released at the end of last week showed a record net longs on gold, suggesting that a pullback is likely. Spot gold lost -0.79% between 18:00 ET and 23:05 ET, while crude oil lost -1.08% (last quote at $87.64/bbl). Iraq's president conveyed that the Kurdish Workers Party (PKK) could possibly announce a ceasefire with Turkey on Monday, but commentators point out that Turkey has rejected several unilateral ceasefires in the past. An executive from Saudi Arabia's Aramco said that there isn't much the energy industry can do about factors influencing prices beyond fundamentals, but added that Saudi Arabia is capable of boosting oil capacity beyond its 2009 target (12.5M bpd).

(by Eben Esterhuizen and Gavin Pierce)