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U.S. Forex Market Commentary

Wed, Nov 11 2009, 01:44 GMT
by GCI Financial Team

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EURO

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4940 level and was capped around the $1.5020 level.  There were no major data released in the U.S. today and liquidity is expected to be lighter tomorrow as some banks will be closed for the U.S. Veteran’s Day holiday.  Atlanta Fed President Lockhart said weakness in the commercial banking sector should not be a “show stopper” while San Francisco Fed President Yellen reported the most recent economic data suggest the U.S. may be experiencing another jobless recovery, adding it may be “gradual and vulnerable” and that the credit crisis has not disappeared entirely.  In eurozone news, European Central Bank official Gonzalez-Paramo reported central banks may need to become more aggressive in preventing asset bubbles from forming.  German financie minister Schauble reported Germay is “emphatically committed” to fiscal discipline and will reduce its budget deficit to conform with European Union rules by 2013.  Data released in the eurozone today saw German ZEW November economic confidence recede slightly as the economic expectations index for the next six months fell to 51.1 from 56.0 in October.  Dutch finance minister Bos reported the public “shouldn’t complain” about a strong euro.  Other data released in the eurozone today saw the October consumer price index up 0.1% m/m and remain unchanged y/y.   European Union official Alumnia reported the eurozone will begin to tighten fiscal policy in 2011.  Euro bids are cited around the US$ 1.4445 level.

JPY / CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.70 level and was capped around the ¥90.15 level.  Finance minister Fujii reported he is concerned about the rise in long-term interest rates and attributes this to uncertainty about the government’s budget plans. Most Japan-watchers believe the new Democratic Party of Japan government will ramp up its issuance of Japanese government bonds in the coming months to subsidize the anticipated increase in public spending.  Data released in Japan overnight saw the trade surplus print at ¥221.6 billion in the first twenty days of October.  Other data saw the September current account surplus expand +0.2% y/y to ¥1.568 trillion while October bank loans were up +1.5% y/y.  Additionally, October corporate bankruptcy cases were off 13.1% y/y.  Minutes from the Bank of Japan Policy Board meeting from 13-14 October were released last week in which policymakers noted they’d work to make sure investors realize the removal of some emergency stimuli program does not mean official interest rates will rise.  The minutes noted the central bank plans to “maintain the accommodative financial environment.” BoJ Governor Shirakawa last week reported it is “unlikely that the decline in prices will induce downward pressure on economic activity.”  On interest rates, Shirakawa added “The Bank of Japan declared an end to the state of emergency, but it will stand pat until the economy returns to normal. The bank will probably continue its super-low rate policy through early 2011.”  BoJ’s Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012.  The central bank recently reported it will stop its purchase of corporate debt and commercial paper at the end of 2009.  BoJ Policy Board’s next interest rate decision is scheduled for 19 November.  The Nikkei 225 stock index climbed 0.62% to close at ¥9,870.73.  U.S. dollar offers are cited around the ¥94.75 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥134.10 level and was capped around the ¥135.40 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥149.00 figure while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.75 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8227 in the over-the-counter market, down from CNY 6.8260.  State Information Centre official Zhu reported Chinese policymakers are unlikely to allow the yuan to appreciate this year and foreign pressures won’t make result in a policy shift by Chinese officials.  The Obama administration reported it will press the Chinese on the yuan in upcoming talks.

STERLING

The British pound came off vis-à-vis the U.S. dollar today as sterling tested bids around the US$ 1.6600 figure and was capped around the $1.6685 level.  Data released in the U.K. today saw the RICS October residential real estate headline price balance rise to +34% from +21% in September, an indication the sector continues to improve.  Also, BRC retail sales climbed sharply for the second consecutive month in October, up 3.8% y/y.  Additionally, the DCLG September house price index was off 4.1% and the September goods trade deficit increased to -₤7.2 billion from -₤6.1 billion.  Bank of England’s quarterly inflation report will be released tomorrow.  Cable bids are cited around the US$ 1.6555 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9015 level and was supported around the ₤0.8935 level. 

Published on  Wed, Nov 11 2009, 01:45 GMT

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