EURO

The euro moved lower vis-à-vis the U.S. dollar yesterday as the single currency tested bids around the US$ 1.3840 level and was capped around the $1.3985 level.  The common currency came off after the EMU-15 December purchasing managers’ index receded to 33.9 from 35.6 in November.  European Central Bank member Nowotny reiterated credit conditions remain tight with credit demand quite weak.  Many traders believe the ECB will reduce interest rates further on 15 January.  In U.S. news, December ISM manufacturing fell to 32.4 from 36.2 in November.  The Federal Reserve is likely to implement new credit facilities in 2009 to support the markets.  The Fed’s balance sheet ballooned from about US$ 800 billion to more than US$ 2.3 trillion in 2008, an indication the central bank is conducting quantitative easing to shore up the weak U.S. economy.  Euro bids are cited around the US$ 1.3300 figure.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar yesterday as the greenback tested offers around the ¥91.45 level and was supported around the ¥90.65 level.  Trading remained illiquid on account of the New Year holiday.  Many traders are loath to take the pair much lower on fears that Japanese monetary authorities could conduct yen-selling intervention.  Bank of Japan is likely to expand monetary policy further in Q1.  The Nikkei 225 stock index closed the year at ¥8,859.56.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥127.35 level and was supported around the ¥126.15 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥131.35 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥85.85 level.  In Chinese news, the CLSA Purchasing Managers’ Index improve to 41.2 in December from 40.9 in November.

STERLING

The British pound moved lower vis-à-vis the U.S. dollar yesterday as cable tested bids around the US$ 1.4375 level and was capped around the US$ 1.4675 level.  Data released in the U.K. today saw Halifax December house prices off a record annualized 16.2% while Bank of England data reported mortgage approvals fell to a record low of 27,000 in November.  Additionally, the U.K. purchasing managers’ index printed at 34.9 in December, up from 34.4 in November.  These PMI data represent the eighth consecutive month the U.K. manufacturing sector has contracted.  Collectively, today’s economic data reinforce expectations that Bank of England’s Monetary Policy Committee will ease rates at least 50bps next Thursday from the current 2.0% level.  Cable bids are cited around the US$ 1.3920 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9645 level and was supported around the ₤0.9435 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar yesterday as the greenback tested offers around the CHF 1.0775 level and was supported around the CHF 1.0615 level.  Some traders believe Swiss National Bank will ease monetary policy further later in Q1 to shore up the slowing domestic economy, particularly given Germany’s sharp economic slowdown.  U.S. dollar offers are cited around the CHF 1.0975 level.  The euro and British pound moved lower vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.4815 and CHF 1.5360 levels, respectively.