EURO
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3520 level and was capped around the US$ 1.3640 level. Traders are talking about the Obama administration’s plan to seek broader powers to seize troubled financial institutions and to increase the regulation of derivative products and other products that may create systemic risk in the U.S. financial industry. In eurozone news, European Commission President Barroso said it is premature to discuss a second stimulus package and said officials should work on implementing the current €200 billion stimulus package. Data released in Germany’s North-Rhine Westphalia today saw provisional inflation slow to 0.1% m/m in March and was up a mere 0.3% y/y. These data suggest Germany’s national CPI rate for this month may – scheduled for release tomorrow – will be on the low side and could be the weakest rate of inflation since 1999. The European Central Bank is readying new measures to increase the availability of credit to eurozone companies. Data released in the eurozone today saw lending to business fall by €4 billion in February, the second decline in three months, while the annualized growth of lending eased to 4.2%. ECB Vice President Papademos reported “may be warranted that the central bank purchase private-sector bonds in the secondary market.” The ECB has been providing unlimited liquidity to banks with maturities up to six months and this latest effort may entail quantitative easing measures including asset purchases. German officials today said it is premature to discuss a third German fiscal stimulus package. The German government will likely downgrade its assessment of the economy from the current -2.25% GDP growth forecast on 29 April. Other data saw the forward-looking GfK April consumer sentiment indicator recede to 2.4 from 2.5 in March. In U.S. news, Q4 2008 GDP growth was downwardly revised to -6.3% from the provisional -6.2% figure while the PCE price index was upwardly revised to -4.9% from -5.0%, a sharp swing from Q3’s +5.0% print. The GDP contraction represented the largest decline in some 26 years. Excluding food and energy, the PCE price gauge was up 0.9% in Q4. Atlanta Federal Reserve President Lockhart hawkishly reported “There is reasonable concern related to the growth of the balance sheet of the central bank in response to the economic difficulties we're having. This could over the long term fuel inflation if monetary aggregates aren't managed well and if the Fed doesn't react at the right time to remove some of the stimulus.” Euro bids are cited around the US$ 1.3245 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.70 level and was supported around the ¥97.45 level. The yen was given across the board as risk aversion diminished and traders chased assets denominated in higher-yielding currencies. Some traders believe Bank of Japan will reluctantly reduce its 0.10% overnight call rate to 0% in short order and announce additional policies to enact quantitative easing measures, possibly by purchasing more asset-backed securities. Data released in Japan today saw the February corporate service price index climb 0.2% m/m and decline 2.6% y/y. The Nikkei 225 stock index climbed 1.84% to close at ¥8,636.33. 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 ¥133.90 level and was supported around the ¥132.30 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥143.55 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.60 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8304 in the over-the-counter market, up from CNY 6.8320.
