EURO
The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3680 level and was supported around the $1.3455 level. The U.S. government on Friday announced that it will take equity ownerships in some U.S. banks to help stimulate lending to consumers and companies and restore confidence in the interbank lending market. This is the first time the U.S. government has done this since the Great Depression. U.S. Treasury Secretary Paulson scheduled a meeting for this afternoon in which the heads of major U.S. banks will convene. The common currency gained ground on news that European governments plan to inject billions into troubled banks and guarantee bank borrowing. Germany’s plan involves a €500 billion package while France’s plan involves a US$ 55 billion fund to assume stakes in French banks. German Economic Minister Glos said German economic growth will decelerate even more next year. European Central Bank member Liikanen reported that mere not be any increase in economic growth until “later” in 2009. ECB member Bini Smaghi said the recent pullback in the euro is unlikely a long-term trend and added it “will remain a strong currency, above all if we manage to get out of this financial crisis quickly. I think $1.55 was an excessively high level which reflected much higher growth expectations for Europe than for the United States. I think Italian and European Union exporters are very happy about (the euro's easing)." ECB’s Welling called for the creation of a pan-European supervisor. In U.S. news, the Federal Reserve essentially offered unlimited U.S. dollar funding, noting it would meet all bids from commercial bids at a fixed interest rate along with the ECB, Bank of England, and Swiss National Bank. Euro bids are cited around the US$ 1.3320 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥101.25 level and was supported around the ¥99.55 level. The Japanese government is considering a plan to guarantee all bank deposits and Bank of Japan indicated it may participate in global efforts to increase U.S. dollar funding to strained Japanese money markets. Traders are paying close attention to reports that Japan’s Mitsubishi UFJ Financial Group may purchase 21% of U.S. investment bank Morgan Stanley. Japanese financial markets were closed for a market holiday today. The Nikkei 225 stock index closed on Friday at ¥8,276.43. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥137.75 level and was supported around the ¥134.15 level. The British pound and Swiss franc climbed higher vis-à-vis the yen as the crosses tested offers around the ¥175.80 and ¥89.45 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8258 in the over-the-counter market, down from CNY 6.8357. People’s Bank of China Deputy Governor Yi Gang reported “At this critical moment of financial crisis, coordination and cooperation are extremely important.” Data released in China overnight saw Q3 consumer confidence fall to 93.8 while China’s trade surplus was off 2.6% y/y to US$ 180.9 billion.
STERLING
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.7440 level and was supported around the $1.6925 level. Cable extended the late-day gains it realized on Friday following a report that it would inject up to ₤37 billion in three major U.K. banks, namely Royal Bank of Scotland, Lloyds TSB, and HBOS. Bank of England Monetary Policy Committee member Sentance reported the economy will likely contract in H2 2008 and added the chances of a severe downturn have increased. Data released in the U.K. today saw September factory gate inflation decline for a second consecutive month in September with output prices off 0.3% and the annual rate lower at 8.5%. Similarly, input prices fell 1.2% m/m and were up 24.5% y/y. Cable bids are cited around the $1.6635 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7780 level and was capped around the ₤0.7965 level.
