NEWS / Government Ministries

Forex and Commodity Market Commentary and Analysis (12 October 2006)

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The euro appreciated vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.2565 level and was supported around the $1.2510 level. Technically, today??™s intraday high was right around the 50% retracement of the move from $1.3480 to $1.1640. Dealers sold some dollars after it was reported that the U.S.??™s August trade balance reached an all-time low at ??“US$ 69.9 billion on account of record oil imports, 2.7% more than July??™s ??“US$ 68 billion reading. Trades now await the Treasury International Capital securities data to see if incoming portfolio investments financed the U.S.??™s massive trade deficit two months ago. The U.S.??™s trade deficit with China expanded 12.2% to a record ??“US$ 22 billion. Other data released today saw weekly initial jobless claims rise 4,000 to 308,000. Traders noted that the U.S. dollar could not sustain the small gains it scored after the release of the Federal Open Market Committee meeting minutes yesterday from the 20 September FOMC meeting. Some dealers believe the U.S. dollar could suffer a similar fate when the Fed??™s Beige Book is released today. In eurozone news, German September final consumer price inflation was off 0.4% m/m and up 1.0% y/y. European Central Bank reported EMU-12 consumer spending will likely make an increasing contribution to GDP growth in the coming quarters. Euro bids are cited around the US$ 1.2460 level.

??/ CNY

The yen appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the ??119.25 level and was capped around the ??119.75 level. Bank of Japan Governor Fukui testified today and reiterated ???Since the economy has just moved out of difficulties, we will make adjustments to interest rates cautiously and slowly while checking on economic growth from every angle.??? The government kept its monthly economic assessment unchanged this month and repeated ???while year-on-year consumer prices are rising, price changes excluding those of oil products and other one-off factors are moving around zero.??? Data released in Japan today saw its August current account surplus climb 22.2% y/y to ??1.48 trillion while September bank lending rose 1.6% y/y. Also, the M2+CDs money supply grew 0.6% y/y last month and September consumer confidence receded to 46.3, the second consecutive monthly decline. The Nikkei 225 stock index shed 0.19% to close at ??16,368.81. Dollar bids are cited around the ??118.95/ 40 levels. The euro lost marginal ground vis-? -vis the yen as the single currency tested bids around the ??149.60 level and was capped around the ??150.10 level. The British pound and Swiss franc came off vis-? -vis the yen as the crosses tested bids around the ??221.65 and ??93.90 levels, respectively. The Chinese yuan appreciated marginally vis-? -vis the U.S. dollar as the greenback closed at CNY 7.9148 in the over-the-counter market, down from CNY 7.9149, and at CNY 7.9150 in the exchange-traded market. Data released in China today saw its September trade surplus recede to US$ 15.3 billion from August??™s level of US$ 18.8 billion. Also, People??™s Bank of China reiterated it aims to ???strengthen and improve macroeconomic controls, further push forward financial reforms, keep the exchange rate stable and prevent financial crises at the macro level.???

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The British pound gained ground vis-? -vis the U.S. dollar today as cable tested offers around the US$ 1.8610 level and was supported around the $1.8535 level. Data released in the U.K. today saw RICS September house prices rise at their fastest pace in four years and were up for the eleventh consecutive month. Bank of England Monetary Policy Committee member Sentence today reported the biggest upside risk to inflation remains higher wage increases. Sentance also disputed the market??™s perception that he is a monetary dove. His remarks were seconded by MPC??™s Besley who warned that it is ???still important to keep a careful eye on possible second-round effects in wages and prices.??? Cable bids are cited around the US$ 1.8300 figure. The euro gained marginal ground vis-? -vis the British pound as the single currency tested offers around the ?‚¤0.6760 level and was supported around the ?‚¤0.6745 level.

CHF

The Swiss franc appreciated marginally vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2675 level and was capped around the CHF 1.2735 level. Technically, today??™s intraday high was right around the 61.8% retracement of the move from CHF 1.3235 to CHF 1.1920. U.S. dollar offers are cited around the CHF 1.2815 level. The euro and British pound gained ground vis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.5940 and CHF 2.3615 levels, respectively.

AUD

The Australian dollar gained significant ground vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7510 level and was supported around the $0.7415 level. Technically, today??™s intraday high was just above the 50% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw the September unemployment rate print at 4.8%, unchanged from August??™s revised rate. Australian Treasurer Costello reported drought conditions in Australia are likely to cause a pullback in economic activity. Australian dollar bids are cited around the US$ 0.7405 level.
CAD

The Canadian dollar appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the C$ 1.1345 level and was capped around the C$ 1.1385 level. Data released in Canada today saw the August trade surplus rise 9.1%. U.S. dollar offers are cited around the C$ 1.1455 level.

NZD

The New Zealand dollar moved higher vis-? -vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6615 level and was supported around the $0.6565 level. New Zealand dollar offers are cited around the US$ 0.6685 level.

Gold/ Silver

Gold appreciated vis-? -vis the U.S. dollar today as the yellow metal tested offers around the US$ 578.10 level and was supported around the $571.18 level. The pullback in the U.S. dollar led to gains in gold, as did chatter about physical demand. Silver moved higher vis-? -vis the U.S. dollar as the pair tested offers around the $11.39 level and was supported around the $11.14 level.

Crude Oil

Crude oil moved higher vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures tested offers around the US$ 58.32 level and was supported around the $57.21 level. Traders await the release of weekly U.S. inventories data today.