EURO
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4950 level and was capped around the $1.5050 level. Liquidity was lighter than normal today, especially with most of the U.S. banking system closed for the Veterans Day holiday. U.S. equity markets pressed higher as some dealers extended their growing risk appetite. Data to be released in the U.S. tomorrow include weekly initial jobless claims and continuing claims followed by the September trade balance, October import price index, and November University of Michigan consumer sentiment data on Friday. Federal Reserve officials yesterday spoke yesterday and Dallas Fed President President Fisher said officials would not intervene by buying U.S. dollars unless its depreciation became “disorderly.” Fisher also noted the Fed’s policy of keeping rates low for an “extended period” was negatively impacting the U.S. dollar. Speaking about monetary policy, Fisher said the Fed’s current monetary policy is “appropriate.” In eurozone news, the European Union will convene a special summit on 19 November to designate leaders for the new EU posts of president and foreign policy chief. Data released in the eurozone today saw the Ifo Q4 eurozone climate index improve for the third consecutive quarter. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.05 level and was supported around the ¥89.30 level. U.S. Treasury Secretary Geithner met with Bank of Japan Governor Shirakawa today and said a strong dollar is “very important” for the U.S. Finance minister Fujii has reportedly indicated the Federal Reserve’s low interest rate policy is the reason for the U.S. dollar’s recent weakness. Data released in Japan overnight saw October industrial production up 16.1% y/y while September core machinery orders were up 10.5% m/m, much stronger than expectations, and were off 22.0% y/y. BoJ’s Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The central bank recently reported it will stop its purchase of corporate debt and commercial paper at the end of 2009. BoJ Policy Board’s next interest rate decision is scheduled for 19 November. The Nikkei 225 stock index climbed 0.009% to close at ¥9,871.67. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥133.80 level and was capped around the ¥135.35 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥148.55 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.60 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 6.8227. Data released in China overnight saw October industrial output up 16.1% while retail sales were up 16.2% and consumer price inflation was off 0.5%. Additionally, it was reported that the October trade balance printed at US$ 24 billion. State Information Centre official Zhu yesterday reported Chinese policymakers are unlikely to allow the yuan to appreciate this year and foreign pressures won’t make result in a policy shift by Chinese officials. The Obama administration reported it will press the Chinese on the yuan in upcoming talks.
STERLING
The British pound fell sharply vis-à-vis the U.S. dollar today as sterling tested bids around the US$ 1.6535 level and was capped around the $1.6795 level. Bank of England Governor King said the need for fiscal consolidation is “clear to everyone.” The central bank released its quarterly inflation report today and noted inflation may exceed its 2% inflation rate target in two years even in policymakers start lifting interest rates now. The BoE also indicated the U.K. economy won’t fall back into recession. Overall, the central bank’s inflation report was more hawkish than expected. King reported he has an “open mind” on future increases to the BoE’s asset purchase program. Data released in the U.K. today saw the September ILO unemployment rate decline to 7.8%. Cable bids are cited around the US$ 1.6410 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9050 level and was supported around the ₤0.8940 level.
