EURO
The euro moved lower vis-à-vis the U.S. dollar yesterday as the single currency tested bids around the US$ 1.3850 level and was capped around the $1.4145 level. The common currency lost about 3.4% against the U.S. dollar in 2008. Slovakia joined the euro today, taking the number of member countries to sixteen. Data released in the U.S. yesterday saw weekly initial jobless claims fall 94,000 to 492,000 while continuing jobless claims rose 140,000 to 4.506 million. The Federal Reserve announced this week that it will purchase up to US$ 500 billion in mortgage-backed securities by the middle of 2009 with buying activity commencing in early January. This is the Fed’s latest attempt to reduce mortgage borrowing costs. Most traders expect the European Central Bank will reduce borrowing costs by 50bps as early as 15 January. Euro bids are cited around the US$ 1.3300 figure.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar yesterday as the greenback tested offers around the ¥90.90 level and was supported around the ¥90.10 level. Yesterday’s range was tight ahead of the New Year holiday as traders were loath to assume new market risk, particularly at current levels where the Japanese government is clearly uncomfortable with the yen’s recent ascent. Most traders expect Bank of Japan will continue to provide major amounts of liquidity to the market in Q1 to ease corporate financing pressures. The yen climbed about 19.2% against the U.S. dollar in 2008. The Nikkei 225 stock index closed the year at ¥8,859.56. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥125.35 level and was capped around the ¥127.75 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥133.25 level while the Swiss franc lost ground vis-à-vis the yen and tested bids around the ¥84.25 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar yesterday as the greenback closed at 6.8230 in the over-the-counter market, down from CNY 6.8353. People’s Bank of China reported it will maintain an “appropriately loose” monetary policy in 2009 and maintain a stable yuan at a “reasonable and balanced level.”
STERLING
The British pound moved sharply higher vis-à-vis the U.S. dollar yesterday as cable tested offers around the US$ 1.4695 level and was supported around the US$ 1.4350 level. Sterling lost about 27.3% against the U.S. dollar in 2008. Most traders expect Bank of England will continue to ease monetary policy in Q1 with another rate cut expected as early as January. BoE yesterday offered unlimited dollars in a seven-day repo operation. Cable bids are cited around the US$ 1.3920 level. The euro moved sharply lower vis-à-vis the British pound as the single currency tested bids around the ₤0.9475 level and was capped around the ₤0.9780 level.
SWISS
The Swiss franc depreciated vis-à-vis the U.S. dollar yesterday as the greenback tested offers around the CHF 1.0740 level and was supported around the CHF 1.0540 level. The Swiss franc gained about 5.8% against the U.S. dollar in 2008. Most traders expect Swiss National Bank will continue to expand monetary policy in 2009. U.S. dollar offers are cited around the CHF 1.0975 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.4965 and CHF 1.5690 levels, respectively.
