U.S. Forex Market Commentary

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥105.10 level and was capped around the ¥105.45 level.  Liquidity was reduced on account of the ongoing Japanese Golden Week holidays and is likely to be reduced in Tokyo for the duration of the week.  Finance minister Nukaga talked about surging inflation in many parts of the world saying “As nations try to figure out what impact that higher input prices will have and how to deal with economic growth and inflation, it's very important that we discuss and bring our collective know-how together on how to make policy in these very difficult times.”  The Nikkei 225 stock index last closed at ¥14,049.26.  Dollar bids are cited around the ¥103.65/ ¥101.35 levels.  The euro depreciated vis-à-vis the yen as the single currency tested bids around the ¥162.35 level and was capped around the ¥163.10 level.  The British pound came off vis-à-vis the yen as sterling tested bids around the ¥206.80 level while the Swiss franc appreciated vis-à-vis the yen and tested offers around the ¥208.30 level.  The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0016 in the over-the-counter market, down from CNY 7.0002.  Data released in China today saw the CFLP April manufacturing PMI survey improve to 59.2 from 58.4 in March.  Goldman Sachs sees April inflation around 8.5% and Lehman Brothers sees 2008 GDP growth below 10.0%.  People’s Bank of China Governor Zhou said “We're always observing very carefully whether there is significant hot money flow into China. In the recent circumstances, (after) the U.S. lowered down the interest rates, a lot of short-term investors pay attention to investing in China. These circumstances may create some new situation.”  Finance minister Yi reported China will boost the flexibility of the yuan’s exchange rate.