EURO
The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4990 level and was supported around the $1.4860 level. The common currency was partially propelled higher by very dovish comments from St. Louis Federal Reserve Bank President Bullard who reported “If you look at the last two recessions, in each case the FOMC watied two and a half-to-three years before we started our tightening campaign. If we took that as a benchmark, that would put us in the first half of 2012.” Fed policymakers concluded at their 3-4 November FOMC meeting that rates will remain low for “an extended period” of time. On Monday, Federal Reserve Chairman Bernanke verbally intervened to support the U.S. dollar and was seconded yesterday by European Central Bank President Trichet. Nevertheless, there have not been much additional verbal intervention from eurozone monetary officials, leading to renewed speculation of dissention among the rank. Treasury Secretary Geithner reported U.S. banks have an “obligation” to lend more. Data released in the U.S. today saw the October headline consumer price index climb 0.3% m/m and was off 0.2% y/y while the ex-food and energy component was up 0.2% m/m and up 1.7% y/y. Also, October housing starts printed at an annualized 529,000 while building permits came in at an annualized 552,000, down from a revised 575,000 in September. In eurozone news, the German government will convene a meeting on 2 December to discuss the economy and financial crisis. Data released in the eurozone today saw September construction output decline 1.1% m/m and 8% y/y. Also, the EMU-16 current account printed at -€5.4 billion in September compared with a revised surplus of €0.6 billion in August. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥89.40 level and was supported around the ¥89.00 figure. Data released in Japan overnight saw October preliminary machine tool orders climb 8.9% m/m and decline 42.5% y/y. Finance ministry Fujii said the government will finalize plans to deal with the tax revenue shortfall in December. Fujii yesterday reported the government is attempting to restrict new Japanese government bond issuance below ¥44 trillion in its formation of the 2010/ 2011 fiscal budget and warned any issuance above this could pose a problem. Fujii also warned that downside risks to the Japanese economy need to be monitored and added the jobless rate “remains high” and the economy remains “severe.” On Monday, Bank of Japan Governor Shirakawa noted “If the continuation of low interest rates (in the U.S.) leads to a substantial rise in long-term interest rates by raising inflation expectations or by generating expectations for a weak dollar, this may give rise to another problem, namely that the fiscal burden increases and in turn the need for adjustments in the government's balance-sheet arises.” BoJ’s Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The central bank recently reported it will stop its purchase of corporate debt and commercial paper at the end of 2009. BoJ Policy Board’s next interest rate decision is scheduled for 19 November. The Nikkei 225 stock index lost 0.55% to close at ¥9,676.80. 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 bids around the ¥134.00 figure and was supported around the ¥132.55 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥149.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.70 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, up from CNY 6.8240. People’s Bank of China member Fan Gang reported Chinese gross domestic product growth will probably be between 8% and 9% in 2010 and does not see a big inflation risk now.
