EURO

The euro slumped vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4785 level and was capped around the $1.4965 level.  The common currency established a new historical high before moving lower.  ECB member Weber reported the central bank has made the correct decision on interest rates and said monetary policy has become more data-dependent.   ECB President Trichet reported “abrupt and sharp” moves in exchange rates are “not in favour of global growth.”  The European Commission noted the euro’s ascent “is obviously something that is concerning us.” Data released in the eurozone today saw the November PMI services fall to 53.7, the lowest level since August 2005. Also, German October import prices were up 0.7% m/m and 2.3% y/y.  EMU-13 October consumer prices rose 2.6% y/y, an acceleration from September’s 2.1% level.  These data could result in additional hawkishness from the ECB, and possibly an additional monetary tightening.  Many traders believe the common currency may test the psychologically-important US$ 1.50 figure next week.  Traders await data in the U.S. next week to further evaluate the likelihood of additional monetary easing from the Fed in December and January.  Euro bids are cited around the US$ 1.4575/ 1.4470 levels.

JPN/CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.55 level and was capped around the ¥108.60 level.  The pair reached its weakest level since June 2005 and yen bears are eyeing the ¥106.95/ 55 levels as the pair’s next downside targets.  Traders have been buying yen on growing risk aversion and an unwinding of short yen carry trades. The Nikkei 225 stock index gained 0.34% to close at ¥14,888.77. Dollar bids are cited around the ¥106.55 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥159.45 level and was capped around the ¥161.65 level.  The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥221.25 and ¥97.70 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.4060 in the over-the-counter market, down from CNY 7.4145. 

STERLING

The British pound lost ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0520 level and was capped around the $2.0760 level.  Technically, today’s intraday high was right around the 50% retracement of the move from $2.1160 to $2.0355 level while today’s intraday low was right around the 50% retracement of the move from $1.9870 to $2.1160.  Data released in the U.K. today saw Q3 GDP expand 0.7% q/w and an annualized 3.2%, down from 0.8% q/q and 3.3% y/y.  Many traders believe these data will add pressure on BoE’s MPC to ease policy further.  MPC member Lomax last night said the BoE “can and should respond quickly and flexibly to early signs of the changing economic weather.” Other data released today saw BBA October mortgage approvals at a record low.  Cable bids are cited around the US$ 2.0365 level.  The euro extended recent gains vis-à-vis the British pound as the single currency tested offers around the ₤0.7215 level and was supported around the ₤0.7180 level.

SWISS

The Swiss franc came off vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1050 level and was supported around the CHF 1.0885 level.  The pair established a new multi-decade low before ceding intraday gains.  Many traders believe SNB will tighten interest rates again next month.  Dollar offers are cited around the CHF 1.1185 level.  The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6295 and CHF 2.2600 levels, respectively.