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U.S. Forex Market Commentary

Tue, Nov 11 2008, 22:23 GMT
by GCI Financial Team

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EURO

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2675 level and was capped around the $1.2800 figure.  Traders are deliberating the likelihood of additional monetary easing from both the European Central Bank and Federal Reserve before the end of the year and again in Q1 2009.  ECB President Trichet and other ECB members have made it abundantly clear that they have not prejudged monetary policy but that it is possible rates could come down in December.  At the Fed, policymakers continue to implement multiple liquidity provision facilities to support commercial banks, investment banks, primary dealers, and the commercial paper market.  Data released in Germany today saw the November ZEW survey’s economic sentiment indicator rise to -53 from -63 in October.  In U.S. news, the regulator of Fannie Mae and Freddie Mac will today announce new initiatives to reduce home foreclosures.  September trade data will be released on Thursday.  Euro bids are cited around the US$ 1.2135 level.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.50 level and was capped around the ¥98.30 level.  Traders paid close attention to comments from Bank of Japan Deputy Governor Yamaguchi in Japan’s parliament overnight.  Many dealers are wondering if the BoJ will be easing monetary policy further, particularly if other central banks continue to reduce borrowing costs to contend with the ongoing credit crisis.  Data released in Japan overnight saw the October service sector sentiment index print at 22.6 while October outstanding bank loans were up 2.2% y/y.    Also, the October M3 money supply was up 0.6% y/y while the September current account surplus was off 48.8% y/y.  Additionally, October corporate bankruptcies were up 13.4% y/y.  The Nikkei 225 stock index lost 3.00% to close at ¥8,809.30.   U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested offers around the ¥123.80 level and was capped around the ¥125.50 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥151.90 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥83.50 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8251 in the over-the-counter market, down from CNY 6.8266.  The government yesterday announced a major US$ 586 billion economic stimulus package and People’s Bank of China Governor Zhou reported the central bank’s monetary policy is being shifted to “moderately easy” from “prudent and flexible.”  Data released in China saw the October trade surplus reach a record US$ 35.24 billion while consumer price inflation receded to a seventeen-month low of +4.0% y/y in October as domestic demand lessened.

STERLING

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5545 level and was capped around the $1.5700 figure.  Many data were released in the U.K. today. First, BRC reported October retail sales were off 0.1% y/y, their first decline since August 2005.  Second, the U.K.’s global goods trade deficit narrowed to ₤7.5 billion in September from a revised ₤8.0 billion in August.  Third, U.K. home sales reached their lowest level in at least 30 years in October.  Economists are concerned with these data because they portend a weak holiday shopping period for retailers and evidence the weak state of final private demand.  U.K. Prime Minister Brown has suggested the government may reduce taxes to help stimulate the economy.  Cable bids are cited around the US$ 1.5275 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8205 level and was supported around the ₤0.8110 level.

Published on  Tue, Nov 11 2008, 22:27 GMT

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