EURO
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4880 level and was capped around the $1.4995 level. The common currency stopped just short of testing the psychologically-important US$ 1.5000 figure. Eurozone finance ministers verbally intervened en masse against the euro’s recent appreciation overnight, reiterating their support for the U.S.’s official strong dollar policy. French finance minister Lagarde talked up the U.S.’s dollar policy and suggested officials may implement an exit strategy from their fiscal and monetary stimuli in 2011 “if the situation in terms of growth stabilizes.” European Central Bank President Trichet reported “excess volatility” in the foreign exchange market was “bad for economic development.” Trichet also noted the U.S.’s official strong dollar policy. ECB member Liikanen reported eurozone economies appear to be stabilizing with “increasing information” that upcoming business quarters are going to be evidence improvements. Despite pronouncements from eurozone officials, there is little evidence that they are prepared to conduct actual intervention by selling euro in the interbank market. Data released in the eurozone today saw German September producer price inflation off 0.5% m/m and 7.6% y/y. In U.S. news, data released in the U.S. today saw September headline producer price inflation off 0.6% m/m and 4.8% y/y while the ex-food and energy components were off 0.1% m/m and up 1.8% y/y. Other data saw September housing starts print at an annualized 590,000 while September building permits came in at an annualized 573,000. San Francisco Fed President Yellen suggested it will be a fair amount of time before the Fed begins to withdraw monetary stimuli from the economy. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.05 level and was supported around the ¥90.10 level. Finance minister Fujii reported the government will issue new bonds to cover an anticipated tax revenue shortfall in 2009/ 2010. Fujii also said the yen’s strength is on account of the Federal Reserve’s “easy” monetary policy – less of an indication that current currency movements are misalignments that will require actual intervention. Data released in Japan overnight saw September revised machine tool orders decline 62.1% y/y and climb 35.5% m/m. Bank of Japan yesterday released its quarterly regional report overnight and noted “Signs of picking up had appeared throughout the economy, although regional differences remained.” The BoJ last week lifted its assessment of the economy for the second consecutive month. Minutes from the BoJ Policy Board’s 16-17 September meeting were released yesterday in which policymakers concluded “A few members were of the view that the positive effects these measures could producer were on the wane.” The central bank is likely to not renew some of its emergency spending programs when they expire at the end of the month. The Nikkei 225 stock index lost 0.98% to close at ¥10,336.84. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥135.85 level and was supported around the ¥134.85 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥147.50 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.75 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8241 in the over-the-counter market, down from CNY 6.8244. People’s Bank of China Deputy Governor Ma reported China’s economic growth accelerated in Q3 from the previous three months. Ma also reported further dollar weakness may fuel expectations of more yuan appreciation.
