EURO
The euro depreciated modestly vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4850 level and was capped around the $1.4965 level. The U.S. dollar failed to gain significant traction from reports of weak third quarter earnings from Bank of American and General Electric. Data released in the the U.S. today saw September industrial production moderate to 0.7% from 1.2% in August while September capacity utilization improved to 70.5% from 69.9%. Additionally, the mid-October University of Michigan consumer sentiment index retreated to 69.4 from the prior reading of 73.5. Other data released in the U.S. today saw August net long-term TIC flows climb to US$ 28.6 billion while total net TIC flows measured US$ 10.2 billion, down from a revised –US$ 107.7 billion in July. Dallas Fed President Fisher said the Fed has not yet restored credit to “Main Street.” In eurozone news, European Central Bank member Tumpel-Gugerell said governments cannot rely on the economic recovery to improve their budgetary problems. She noted “Only a part of the fiscal consolidation will occur through the automatic stabilizers and the temporary nature of some fiscal stimulus measures. Additional and more ambitious fiscal adjustment will be needed as well.” ECB member Bini Smaghi reiterated “it would be premature to say the crisis is over” and added “A new wave of write-downs of euro-zone bank assets may be imminent.” Data released in the eurozone today saw the August trade surplus decrease to €1 billion from €6.8 billion in July. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.30 level and was supported around the ¥90.50 level. Bank of Japan Governor Shirakawa reported “Signs of improvement in Japan’s financial conditions are spreading, but at the same time, borrowing for small companies remains severe and the economic outlook is highly uncertain. Given these circumstances, we consider it is important to persist with our very accommodative policy stance.” Ministry of finance official Gyothen reported “Japan and China need to work together along with the U.S. to stabilize the value of the U.S. dollar.” Bank of Japan upgraded its assessment of the economy this week for the second consecutive month, reporting “Japan’s economy has started to pick up” and adding “the pace of deterioration of business investment is moderating.” The Nikkei 225 stock index climbed 0.18% to close at ¥10,257.56. 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 ¥136.05 level and was supported around the ¥134.95 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.30 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.65 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8243 in the over-the-counter market, up from CNY 6.8230. The U.S. Treasury stopped short of characterizing China as a manipulator of its currency but said China exhibits a “lack of flexibility” on the yuan. Chinese officials have recently indicated they will stimulate domestic final private demand to reduce China’s dependence on foreign trade. Data released in China yesterday saw urban house prices climb 2.8% y/y while data released yesterday saw September’s trade surplus decline less than forecast, off 56% y/y to US$ 12.9 billion. China’s State Administration of Foreign Exchange reported it does not anticipate any upward pressure on the yuan in the near future and noted it expects China’s international balance of payments and net capital inflows to continue to expand. Foreign direct investment was recently up 18% y/y.
STERLING
The British pound appreciated further vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.6400 figure and was supported around the $1.6250 level. Sterling rocketed higher this week on speculation Bank of England may pause its bond-buying program following recent improvements in the economy. The Financial Times reported BoE official Paul Fisher noted central bank policymakers would be likely to pause its asset purchase program and retain the option of “doing more later.” Deputy Governor Bean this week noted that rising asset prices and improving confidence could be positive signs the asset purchase program is working. Data released in the U.K. yesterday saw the September claimant count remain steady at 5%, rising by a less-than-expected 20,800. Short sterling interest rate futures expiring in March 2010 are indicating some traders believe the central bank will raise interest rates by the end of Q1 2010. Cable bids are cited around the US$ 1.5640 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.9095 level and was capped around the ₤0.9185 level.
SWISS
The Swiss franc lost ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0225 level and was supported around the CHF 1.0130 level. Swiss National Bank President Roth said the central bank will raise rates when the economic recovery is “well established” and added Switzerland is in better shape than the rest of Europe. Data released in Switzerland today saw August retail sales decline 1%. Data released in Switzerland yesterday saw the October ZEW survey improve to a record +65 from +58 in September. Data released earlier in the week saw September producer and import prices decline 4.9% y/y. Swiss National Bank continues to cite a risk of deflation in the Swiss economy. U.S. dollar offers are cited around the CHF 1.0320 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5190 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6685 level.
