EURO
The euro appreciated sharply vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4050 level and was supported around the US$ 1.3890 level. The common currency reached its highest level since 31 December 2008 as traders continued to speculate the U.S. dollar may lose its ‘AAA’ credit rating. The pair was bid higher every day this week and easily absored the psychologically-important US$ 1.4000 figure before yielding some intraday gains. U.S. Treasuries extended their slide with the ten-year Note reaching a yield of 3.453%, its highest level since 19 November 2008. Treasury Secretary Geithner reported it is important for the administration to “put in place policies that will bring down deficits to a sustainable level over the medium term.” The budget deficit is projected to be as high as 12.3% of gross domestic product this year and decline to 6% in 2011. Geithner also conceded it is “possible” the unemployment rate could reach 10% or more and added the economic recovery is still in the “early stages.” The dollar was also on the defensive today after Bank United Financial became the 34th U.S. financial institution to fail this year. In eurozone news, the French government may raise its forecast for the 2009 economic contraction to -2.5% to -3.0% from the current -3.0% forecast. Euro bids are cited around the US$ 1.3435 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥94.90 level and was supported around the ¥93.85 level. Bank of Japan raised its assessment of the economy for the first time in nearly three years today. “Economic conditions in Japan have been deteriorating," but "the pace of deterioration in economic conditions is likely to moderate gradually,” the central bank noted. BoJ Governor Shirakawa reported the country’s gross domestic product will probably be much better in the April to June quarter than the January to March quarter. This likely means monetary policy will remain unchanged for the foreseeable future. BoJ’s Policy Board voted unanimously to keep the overnight call rate unchanged at 0.10% and voted to accept U.S. Treasury Bonds and other foreign government debt as collateral for funding operations. Data to be released in Japan next week include April industrial production and some economists believe it staged a recovery over March’s data. Economy minister Yosano reported “We aren't at all thinking about intervening in the foreign exchange markets at this point.” The Nikkei 225 yesterday stock index lost 0.41% to close at ¥9,225.81. 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 ¥132.95 level and was supported around the ¥130.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥151.05 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.50 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8255 in the over-the-counter market, up from CNY 6.8250.
STERLING
The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5940 level and was supported around the $1.5755 level. Data released in the U.K. today saw Q1 gross domestic product growth off 1.9% q/q and 4.1% y/y. Also, Q1 household spending was off 1.2%, the largest quarterly decline since 1980. Bank of England Monetary Policy Committee member Blanchflower said the U.K. economy has passed the midpoint of its economic recession and stated the labour market outlook remains “terrible.” He added the number of U.K. residents without hobs will rise by about 100,000 per month until the end of the year. Blanchflower also said the BoE is conducting quantitative easing as quickly as it can. BoE Deputy Governor Bean added “the bottom in economic activity may not be too far off.” Cable bids are cited around the US$ 1.5315 level. The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.8840 level and was supported around the ₤0.8760 level.
SWISS
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0810 level and was capped around the CHF 1.0935 level. The pair reached its lowest level since 5 January 2009. U.S. dollar offers are cited around the CHF 1.1165 level. The euro gained marginal ground vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5235 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.7195 level.
