NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro came off vis-? -vis the U.S. dollar today as the single currencytested bids around the US$ 1.3280 level and was capped around the $1.3325level.  Technically, today??™s intraday lowwas just above the 23.6% retracement of the move from $1.3070 to $1.3340.  All eyes are on the Federal Reserve this weekas the Federal Open Market Committee convenes tomorrow and Wednesday todeliberate interest rates.  Most tradersdo not expect any change in the federal funds target rate and as usual, dealerswill be most interested in the Fed??™s policy statement.  Producer and consumer prices data releasedlast week confirm that price pressures remain elevated in the U.S. economy thusthe Fed is likely to include language to that effect.  The recent meltdown in the sub-prime mortgagemarket, however, has many traders thinking the FOMC will loosen monetary policylater this year and it remains to be seen if the FOMC will incorporate anyreferences to the U.S.home credit market.  Fed ChairmanBernanke and other Fed officials will speak on Thursday and their comments willbe scrutinized, especially in light of this week??™s rate decision, the mortgagemarket meltdown, and recent equity market volatility.  Traders await today??™s monthly survey from theNational Association of Home Builders.  Euro bids are cited around the US$ 1.3245level.

 
JPN/CNY

The yen depreciatedvis-? -vis the U.S. dollar today asthe greenback tested offers around the ??117.60 level and was supported aroundthe ??116.25 level.  Technically, today??™sintraday low was right around the 76.4% retracement of the move from ??114.45 to??122.15.  Bank of Japan??™s Policy Boardbegan its two-day interest rate meeting and is not expected to change policy atthis time. BoJ Governor Fukui is expected to reiterate the central bank??™spolicy to hike rates gradually.  Datareleased in Japanovernight saw February department store sales climb 1.7% y/y.  The Nikkei 225 stock index gained 1.59% toclose at ??17,009.55.  Dollar bids arecited around the ??116.65/25 levels.  The euro moved higher vis-? -vis the yenas the single currency tested offers around the ??156.30 level and was supportedaround the ??154.75 level.  The British pound and Swiss francappreciated vis-? -vis the yen as the crosses tested offers around the??228.65 and ??97.25 levels, respectively. The Chinese yuan was unchanged vis-? -visthe U.S. dollar as the greenback closed at CNY 7.7360 in the over-the-countermarket.  People??™s Bank of China liftedits benchmark lending rate by 27bps to 6.39% this weekend and lifted itsdeposit rate by 27bps to 2.79%.

STERLING

The British pound gained ground vis-? -vis the U.S.dollar todayas cable tested offers around the US$ 1.9470 level and was supported around the$1.9385 level.  Technically, today??™sintraday high was just above the 38.2% retracement of the move from $1.9915 to$1.9180.  Data released in the U.K. today sawRightmove March house prices up 1.5% m/m and 12.2% y/y.  Traders await the release of the March Bankof England Monetary Policy Committee meeting minutes on Wednesday and arecurious to see if they will yield any clues about additional monetarytightening.  Traders also awaitChancellor Brown??™s Budget statement on Wednesday and are monitoring reportsthat British bank Barclays may make a play for ABN AMRO. Cable bids are citedaround the US$ 1.9355 level.  The euro came off vis-? -vis the Britishpound as the single currency tested bids around the ?‚¤0.6830 level and wascapped around the ?‚¤0.6865 level.

 
SWISS

The Swiss franc weakened vis-? -vis the U.S. dollartoday asthe greenback tested offers around the CHF 1.2135 level and was supportedaround the CHF 1.2045 level.  Tradersawait the release of February import and producer prices data tomorrow. Dollaroffers are cited around the CHF 1.2210 level. The euro and British pound gainedground vis-? -vis the Swiss franc as the crosses tested offers around theCHF 1.6125 and CHF 2.3610 levels, respectively.

 
AUD

The Australian dollar gained ground vis-? -vis theU.S. dollar today as the Aussie tested offers just above the psychologically-importantUS$ 0.8000 figure and was supported around the $0.7935 level.  The pair reached levels not seen sinceFebruary 2004, bolstered by comments from Reserve Bank of AustraliaDeputy Governor Edey.  Traders are nowpricing in a 50% chance of a rate hike in June though some dealers see a moveas early as next month.  Australiandollar bids are cited around the US$ 0.7925 level.

 
CAD

The Canadian dollar appreciated marginally vis-? -visthe U.S. dollar today as the greenback tested bids around the C$ 1.1740 level and was cappedaround the C$ 1.1780 level.  Datareleased in Canada today saw January wholesale trade fall 0.5% m/m whileCanadian investors purchase a record C$ 7.8 billion in foreign securities inJanuary, the 24th consecutive month that Canadians have been netbuyers of foreign securities.  Canada willreveal its fiscal year 2007-2008 federal budget later in the North Americansession.  U.S. dollar bids are citedaround the C$ 1.1695 level.