EURO
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4945 level and was supported around the $1.4835 level. The common currency continued its ascent towards the psychologically-important US$ 1.50 figure with the U.S. dollar unable to gain traction from positive or negative news. U.S. equities markets notched impressive gains with the Dow Jones closing above the psychologically-imporant 10,000 level for the first time since October 2008. Minutes from the Federal Open Market Committee’s September interest rate deliberations also contributed to the U.S. dollar’s sell-off as a wide range of opinions from policymakers were published. The minutes reported “the cost of the economy turning out to be weaker than anticipated could be relatively high.” Some Fed officials wanted to increase the amount of mortgage-backed debt the Fed will purchase while other policymakers wanted to end the program early. Data released in the U.S. today saw September retail sales off 1.5% , a sharp decline from August’s revised +2.2% climb, while the ex-autos component was up 0.5% , down from the revised +1.0% reading in August. Other data saw August business inventories off 1.5%, down from 1.1% in July, while the September import price index was up 0.1% m/m and off 12.0% y/y. Fed Vice Chairman Kohn yesterday reported the U.S. economic recovery will be subdued with low growth keeping inflation under control. In eurozone news, August output was up 0.9% m/m and off 15.4% y/y. European Central Bank policymaker Bini Smaghi reported the central bank may lift interest rates “before the business cycle reaches its peak.” Data released in the eurozone overnight saw August industrial production up 0.9% m/m and decline 15.4% y/y. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.80 level and was capped around the ¥89.90 level. As expected, Bank of Japan kept its overnight call rate target unchanged at 0.10% and upgraded its economic assessment. BoJ Governor Shirakawa optimistically reported “the environment for corporate debt issuance is in good shape, except low-rated debt. The need for policy to support the market is receding.” Traders interpreted this as a further indication that BoJ leadership wants to end its emergency funding programs and is considering exit strategies from these policies. Data released in Japan overnight saw the September corporate goods price index climb 0.1% m/m and decline 7.9% y/y. In contrast to the BoJ’s assessment, finance minister Fujii reported “it is correct to say the economy on the whole is in a more severe state. We need to try to understand the BoJ’s position.” The Nikkei 225 stock index lost 0.16% to close at ¥10,060.21. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥133.75 level and was supported around the ¥132.25 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥143.85 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥88.20 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8219 in the over-the-counter market, down from CNY 6.8222. Chinese officials have recently indicated they will stimulate domestic final private demand to reduce China’s dependence on foreign trade. Data released in China overnight saw September’s trade surplus decline less than forecast, off 56% y/y to US$ 12.9 billion.
STERLING
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6025 level and was supported around the $1.5900 figure. Prime Minister Brown said the government will “enforce” banks’ lending agreements to counter claims that smaller and mid-sized companies are finding it more difficult to access credit. Data released in the U.K. today saw the September claimant count remain steady at 5%. Cable bids are cited around the US$ 1.5640 level. The euro moved lower vis-à-vis the British pound as the single currency tested offers around the ₤0.9350 level and was supported around the ₤0.9295 level.
