NEWS / Foreign Exchange

Forex and Commodity Market Commentary and Analysis (11 September 2006)

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The euro gained marginal ground vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.2740 level and was supported around the $1.2650 level. Technically, today??™s intraday low was right around the 50% retracement of the move from $1.3665 to $1.1640. European Central Bank member Stark was quoted in the media as saying the markets understand the ECB??™s intention to remain ???strongly vigilant.??? Most traders continue to believe the ECB will lift interest rates in October and again in December. ECB President Trichet spoke at the G10 meeting in Basel today and reiterated central bankers cannot afford to be complacent about inflation pressures. Re-elected ???Eurogroup??? President Juncker indicated he asked EMU-12 finance ministers ???not to be too outspoken on monetary policy.??? In U.S. news, traders await remarks from Boston Fed President Minehan, St. Louis Fed President Poole, and Fed Governor Kohn. Traders await the release of retail sales data on Thursday and CPI data on Friday. Euro bids are cited around the US$ 1.2560 level.

??/ CNY

The yen came off vis-? -vis the U.S. dollar today as the greenback tested offers around the ??117.40 level and was supported around the ??116.60 level. Data released in Japan today saw the Q2 GDP upwardly revised with the annualized rate moving to 1.0% from a preliminary +0.8%. The GDP deflator was off 0.8% y/y in the April ??“ June quarter, its smallest decline since October ??“ December 2004 when it came in at -0.4%. Also, Japanese core machinery orders receded 16.7% m/m in July, weaker-than-expected. Traders believe these data reinforce the view that Bank of Japan will continue to tighten monetary policy gradually. The Nikkei 225 stock index lost 1.78% to close at ??15,794.38. Dollar bids are cited around the ??116.75/ 115.20 levels. The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??149.30 level and was supported around the ??147.75 level. The British pound and Swiss franc moved higher vis-? -vis the yen as the crosses tested offers around the ??219.05 and ??94.55 levels, respectively. The Chinese yuan moved lower vis-? -vis the U.S. dollar as the greenback closed at CNY 7.9542 in the over-the-counter market, up from CNY 7.9485, and at CNY 7.9535 in the exchange-traded market. Data released in China today saw consumer price inflation climb 1.2% y/y in the January ??“ August period while the August trade surplus printed at US$ 18.8 billion.

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The British pound came off vis-? -vis the U.S. dollar today as cable tested bids around the US$ 1.8600 figure and was capped around the $1.8705 level. Technically, today??™s intraday low was just above the 61.8% retracement of the move from $1.9550 to $1.7045. Data released in the U.K. today saw government data confirm that U.K. house prices climb 6.0% y/y in July. Also, it was reported that August??™s trade balance was at -?‚¤6.3 billion while London retail sales increased sharply in August, up 22.3% y/y. Other data released today saw August input prices were off 1.2% m/m, more-than-expected and the largest decline since December 2004. On an annualized basis, input prices were up 7.5% y/y, significantly below expectations. Traders are selling sterling on diminishing expectations of additional rate hikes from Bank of England??™s Monetary Policy Committee. Cable bids are cited around the US$ 1.8535 level. The euro moved higher vis-? -vis the British pound as the single currency tested offers around the ?‚¤0.6815 level and was supported around the ?‚¤0.6785 level.

CHF

The Swiss franc moved higher vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2390 level and was capped around the CHF 1.2500 figure. Swiss National Bank is expected to tighten monetary policy on Thursday by +25bps and Q2 industrial production data will be released on Friday. Dollar offers are cited around the CHF 1.2520 level. The euro and British pound moved lower vis-? -vis the Swiss franc as the crosses tested bids around the CHF 1.5785 and CHF 2.3155 levels, respectively.

AUD

The Australian dollar depreciated vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$0.7505 level and was capped around the $0.7545 level. Technically, today??™s intraday low was just above the 50% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw housing finance for owners climb 1.3% m/m to A$ 14.21 billion in July. Australian dollar bids are cited around the US$ 0.7385 level.

CAD

The Canadian dollar moved lower vis-? -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1225 level and was supported around the C$ 1.1175 level. Data released in Canada today saw August housing starts fall to 213,700. U.S. dollar offers are cited around the C$ 1.1255 level.


NZD

The New Zealand dollar moved higher vis-? -vis the U.S. dollar today as the kiwi tested offers around the US$0.6415 level and was supported around the $0.6340 level. New Zealand dollar offers are cited around the US$ 0.6495 level.

Gold/ Silver

Gold depreciated sharply vis-? -vis the U.S. dollar today as the yellow metal tested bids around the US$583.00 figure and was capped around the $611.80 level. The pair continues to track the oil market lower and is off some 7.5% since Wednesday. Silver came off vis-? -vis the U.S. dollar as the pair tested bids around the US$11.17 level and was capped around the $12.16 level.

Crude Oil

Crude oil moved lower vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for October delivery tested bids around the US$ 65.09 level and was capped around the $66.27 level. News that Iran has offered a two-month suspension of uranium enrichment pursuant to talks with the European Union saw oil prices come off. OPEC today announced it will continue supplying oil at a rate around 28 million barrels per day.