EURO
The euro lost ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3880 level and was capped around the $1.4030 level. The common currency failed to extend yesterday’s gains as U.S. economic data released today were on the weak side, reinforcing the view the economic recovery is lagging. The big driver was a considerably weaker-than-expected July University of Michigan consumer sentiment number that printed at 64.6, down from 70.8 in June and far below estimates. Also, June import prices were higher-than-expected, up 3.2% m/m and -17.4% y/y Also, the May trade balance printed at –US$ 26.0 billion, up from a revised –US$ 28.8 billion. Federal Reserve Vice Chairman Kohn warned that legislative plans to audit the Fed’s monetary policmaking could “cast a chill” on the central bank’s interest rate deliverations. Minneapolis Federal Reserve President Stern optimistically reported “There now are in fact positive signs of stabilization in consumer spending, manufacturing activity, and various measures of residential real estate activity, including the volume of home sales and starts of single-family units. The first stage of economic recovery is close at hand” even though the labour market “continues to deteriorate.” In eurozone news, the German wholesale price index was up 0.9% m/m and off 8.8% y/y. Euro bids are cited around the US$ 1.3435 level.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥91.75 level and was capped around the ¥93.20 level. The pair came off following weaker-than-expected U.S. consumer confidence data. France’s Renault SA Chief Executive Officer Carlos Ghosn said his industry will not rebound before 2011. Also, the German media reported the International Monetary Fund is considering at least ten aid programs with Eastern European governments. Additionally, the Central Bank of the Russian Federation reduced interest rates today. Collectively, these suggest the global economy may be weaker-than-expected and risk appetite may be waning, hence the yen’s appreciation. There is new talk that Bank of Japan’s Policy Board is considering an extension of its unconventional monetary policies through their current September expiration. Data released in Japan today saw the June corporate goods price index decline 6.6%, the largest fall on record. Prime Minister Aso reported he “will decide on the timing of the dissolution (of Parliament) in the near term.” The Nikkei 225 stock index lost 0.04% to close at ¥9,287.28. 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 ¥127.80 level and was capped around the ¥130.60 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥148.35 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥84.40 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8317 in the over-the-counter market, up from CNY 6.8308. Chinese officials again called on global leaders to reduce the U.S.’s dollar’s role as the main international reserve currency. German Chancellor Merkel countered and said what the Chinese have proposed “is not yet of practical relevance in the near future.”
