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U.S. Forex Market Commentary

Wed, Sep 24 2008, 22:42 GMT
by GCI Financial Team

GCI

EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4745 level and was supported around the $1.4635 level.  The common currency gained ground on reports that Warren Buffett’s Berkshire Hathaway would invest US$ 5 billion in Goldman Sachs Group.  Investors greeted this with guarded optimism that the U.S. banking system will be able to recapitalize to some extent through private funding channels and not have to rely exclusively on the proposed US$ 700 billion government bailout.  Japan’s Sumitomo Group is also said to be considering a sizable investment in Goldman Sachs Group.  Federal Reserve Chairman Bernanke and U.S. Treasury Secretary Paulson are testifying before the Senate again today about the proposed bailout to fix the hamstrung U.S. credit markets.  The Fed announced it established new currency swap lines with the central banks of Australia, Denmark, Norway, and Sweden to provide U.S. dollar liquidity to those banking systems.  Credit default swaps on 10-year U.S. Treasury debut reached a record high today at 29.2 bps as traders doubted the U.S. viability of the U.S. government’s US$ 700 billion bailout plan.  Data released in the U.S. today saw existing home sales fall 2.2% to a 4.91 million annualized pace with the median national home price off 9.5%.  In eurozone news, European Central Bank member Kranjec said the ECB does not yet see a “recession” on the economic horizon.  Data released in the eurozone saw the German Ifo’s business climate index fall to 92.9 in September from 94.8 in August, the lowest reading since May 2005 and below expectations.  Separate surveys revealed French and Italian business confidence remains at multi-year lows.  Also, the EMU-15 July current account deficit reached €1.7 billion.  Euro bids are cited around the US$ 1.3840 level.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.35 level and was supported around the ¥105.35 level.  Japanese financial markets reopened overnight and Taro Aso was formally named as the new prime minister.  Aso quickly named former trade minister Shoichi Nakagawa as the new finance minister and Nakagawa will also serve as the new financial services minister.  Kaoru Yosano is maintaining his post as the economics minister.  Aso is an advocate of tax cuts and spending increases to stimulate the economy.  The yen weakened across the board as traders became less risk-averse following Berkshire Hathaway’s appreciable US$ 5 billion investment in Goldman Sachs Group.  Data released in Japan overnight saw big Japanese manufacturers become less pessimistic about business conditions in the three months to September according to a government survey as the BSI sentiment index at large manufacturers improved to -10.0 from -15.1.  Bank of Japan will release its quarterly tankan corporate survey next week and the central bank is expected to keep interest rates unchanged for the next several months.  The Nikkei 225 stock index gained 0.20% to close at ¥12,115.03.  U.S. dollar bids are cited around the ¥102.45 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥156.15 level and was supported around the ¥154.45 level.  The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥197.45 and ¥97.90 levels, respectively.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8237 in the over-the-counter market, up from CNY 6.8135.

STERLING

The British pound lost marginal ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8500 figure and was capped around the $1.8605 level.  Data released in the U.K. today saw September retail sales decline for the sixth consecutive month as CBI’s distributive trades survey printed at -27, up from -46 in August.  Bank of England Monetary Policy Committee member Blanchflower reported recent financial markets turmoil has worsened the U.K.’s economic outlook.  Blanchflower has repeatedly called for the MPC to reduce interest rates and today added “I do not rule out the possibility that one or more of the monthly increases in the unemployment rate this year could be as much as 0.4 percent, which would translate to an unprecedented increase of 125,000.”   Cable bids are cited around the $1.8150 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7940 level and was supported around the ₤0.7885 level.

SWISS

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0895 level and was supported around the CHF 1.0805 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from CHF 1.0010 to CHF 1.1415.  U.S. dollar offers are cited around the CHF 1.1430 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5970 and CHF 2.0235 levels, respectively.

Published on  Wed, Sep 24 2008, 22:45 GMT