EURO
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4295 level and was supported around the $1.4190 level. The common currency retraced some of yesterday’s losses as U.S. economic data were generally weaker-than-expected. First, it was reported that MBA mortgage applications were off 2.2% in the latest week, down from the prior reading of +7.5%. Second, August Challenger job cuts were off 13.8% y/y, down from the prior reading of -5.7%. Third, the August ADP employment report evidenced a 298,000 contraction in private sector jobs, worse than forecast but better than July’s revised reading of -360,000. Fourth, July factory orders printed at +1.3%, below estimates but above the revised June print of +0.9%. Fifth, Q2 unit labour costs were off 5.9%, down from the preliminary reading of -5.8%. Sixth, it was reported that Q2 non-farm productivity grew a healthy 6.6%, up from the prior reading of 6.4%. While productivity growth is generally seen as a long-term benefit to the economy, it is also coincident with a decrease in payrolls and that means companies are accomplishing more with fewer workers. Seventh, August personal bankruptcies were up 24% y/y. Minutes from the Federal Open Market Committee’s interest rate deliberations on 12 August were released today and they did not offer much guidance about the Fed’s plans to maintain significant amounts of liquidity in the banking system to support the economy. In eurozone news, the German finance ministry reported the state of the economy has “stabilized” following a meeting of Ecofin finance ministers in Brussels. The hot button in the eurozone and U.K. now is a plan to limit bankers’ bonuses. Data released in the eurozone today saw EMU-16 industrial producer prices register their sharpest annual decline in more than 27 years, off 0.8% m/m and 8.5% y/y. Also, EMU-16 Q2 GDP was off 0.1% q/q and 4.7% y/y. Euro bids are cited around the US$ 1.3900 figure.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥92.10 level and was capped around the ¥93.05 level. The pair reached a seven-week low as traders reacted to a worse-than-expected U.S. private sector jobs report. Risk aversion remains strong with the VIX index – a measure of stock market volatility – at its highest level since 10 July. Bank of Japan Governor will attend the Group of Twenty meeting in London this week followed by the Bank for International Settlements meeting in Basel. Democratic Party of Japan legislator Kohei Otsuka said the new DPJ government “won’t meddle” in the central bank’s monetary policy and market operations and added the new government will “respond appropriately” to excessive currency moves. Data released in Japan overnight saw the August monetary base climb 6.1% y/y. The Nikkei 225 stock lost 2.02% to close at ¥10,280.46. 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 ¥131.00 figure and was capped around the ¥132.50 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 lower vis-à-vis the yen and tested bids around the ¥86.40 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8273 in the over-the-counter market, up from CNY 6.8257. China announced today that it plans to purchase US$ 50 billion in International Monetary Funds bonds. Chinese benchmark money rates rose by the most in one month on speculation that demand for capital will increase ahead of Metallurgical Corp. of China Ltd’s first share issuance next week. Data released in China yesterday saw the August Purchasing Managers’ Index improve to 54. China is experiencing its worst export slump in more than two decades and some economists are predicting China’s US$585 billion stimulus could lead to a surge in Chinese imports in the fourth quarter.
