EURO
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4070 level and was supported around the $1.3860 level. Group of Eight officials convened in Italy and did not find any resolution regarding calls for a new international reserve currency. French President Sarkozy said global leaders need to have a dialogue regarding the role of leading currencies, noting “Sixty years later one must ask oneself the question, shouldn't a world multi-polar in politics be mirrored by a multi-polar world in the field of the economy. One needs not be an expert to understand that this is necessary for the stability of the economy.” White House spokesman Gibbs verbally intervened saying “I think that despite whatever talk you might hear, I don't see that there's any movement away from the notion of the dollar being that currency.” German finance minister Steinbrueck warned credit problems may worsen later this year and said Bundesbank has the ability to purchase corporate bonds directly, a move that is resisted by Bundesbank’s Weber and others. European Central Bank member Nowotny indicated 2011 EMU-16 economic growth may be between 2% and 3% but warned the EMU-16 unemployment rate may rise above 10%. ECB’s Bonello said the ECB will do what is needed to keep inflation near 2%. Data released in Germany today saw June consumer price inflation up 0.4% m/m and 0.1% y/y while Germany’s trade surplus increased to ₤9.6 billion in May. In U.S. news, May wholesale sales were up +0.2% m/m and off 19.9% y/y. Also, weekly initial jobless claims were off 52,000 to 565,000 while continuing jobless claims were up 159,000 to 6.883 million. Euro bids are cited around the US$ 1.3435 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥93.60 level and was supported around the ¥92.35 level. The yen gave back recent gains as concerns eased about the slow recovery of the global economy. Risk appetite improved overnight and vice finance minister Sugimoto verbally intervened, saying the “government will continue to monitor currency markets closely.” Similarly, Chief Cabinet Secretary Kawamura reported “excessive currency movements are undesirable.” Most dealers believe Japanese officials are most concerned with the speed of the yen’s ascent. A Ministry of Foreign Affairs official noted “Our stance ion the U.S. dollar has been unchanged. We will support the U.S. dollar’s confidence.” Economists express doubts that Japan’s economy is experiencing a sustainable economic recovery. Data released in Japan today saw June total machine orders up 25.5% m/m and off 73.1% y/y. The Nikkei 225 stock index lost 1.37% to close at ¥9,291.06. 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 ¥130.85 level and was supported around the ¥128.10 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥152.35 level while the Swiss franc moved higher vis-à-vis the yen and tested bids around the ¥86.50 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8308 in the over-the-counter market, down from CNY 6.8318. Chinese official Dai Bingguo reported the global foreign exchange system needs to become more diversified.
