NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro weakened marginally vis-? -vis the U.S.dollar todayas the single currency tested bids around the US$ 1.3270 level and was cappedaround the $1.3315 level.  Technically,today??™s intraday low was right around the 23.6% retracement of the move from$1.3070 to $1.3340.  Some traders arereluctant to put on new positions ahead of the two-day Federal Open MarketCommittee meeting that begins today. Most traders expect the Fed to keep thefederal funds target rate unchanged but many expect some subtle nuances in theFOMC??™s statement that could evidence policymakers??™ concern over recent marketvolatility and allude to the possibility of a rate cut later this year.  This will be a tricky proposition for theFed, however, as recent inflation data confirm that price pressures remainelevated. Data released in the U.S. today saw February housing starts rise 9.0%to an annualized pace of 1.53 million units while February building permitswere off 2.5% to an annualized clip of 1.532 million units.  Also, Redbook chain store sales were up 0.5%m/m in the first two weeks of March while ICSC-UBS chain store sales were up0.4% w/w.  In eurozone news, Germanproducer prices rose 0.3% m/m and 2.8% y/y.  Euro bids are cited around the US$ 1.3235/ 05levels.

 
JPN/CNY

Theyen appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the ??117.05 leveland was capped around the ??118.00 figure. Technically, today??™s intraday low was just below the 38.2% retracementof the move from ??109.00 to ??122.15.  Asexpected, Bank of Japan??™s Policy Board did not change interest rates overnight,leaving the unsecured overnight call rate at 0.50%.  The central bank also kept its assessment ofthe economy unchanged, noting it is ???expanding moderately.??? BoJ Governor Fukuispoke overnight and said the recent developments in the global equity marketshave been a ???healthy correction.??? There is speculation in the market that BoJ??™stankan survey of consumer sentiment to be released on 2 April could evidence asmall decline in business sentiment to about +24.  The Nikkei 225 stock index climbed 0.90% toclose at ??17,163.20.  Dollar bids arecited around the ??116.25 level. The eurocame off vis-? -vis the yen as the single currency tested bids around the??155.60 level and was capped around the ??156.95 level.  TheBritish pound moved higher vis-? -vis the yen as sterling tested offersaround the ??230.75 level while the Swissfranc weakened vis-? -vis the yen as the pair tested bids around the ??96.55level.  The Chinese yuan weakened marginally vis-? -vis the U.S. dollar asthe greenback closed at CNY 7.7375 in the over-the-counter market, up from CNY7.7360.  Data released in China today sawFebruary value-added industrial output climb 12.6% y/y.  Traders are talking about a market reportthat Chinawill begin limiting its acquisition of foreign reserves.

STERLING

The British pound rocketed higher vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9605 level and was supported around the $1.9430 level.  Technically, today??™s intraday high was rightaround the 50% retracement of the move from $1.9670 to $1.9180.  Data released in the U.K. today sawthe February consumer price index climb 2.8% y/y, the second highest result intwelve years. These data increase the chances that Bank of England??™s MonetaryPolicy Committee will tighten rates by +25bps next month.  Other data released today saw BSA and CMLFebruary mortgage lending and approvals reach their highest level ever for themonth while BBA reported U.K.mortgage lending growth moderated last month. Also, the February M4 money supply was up 12.8% y/y and public sectornet borrowing was at ?‚¤1.0 billion last month. Traders await Chancellor Brown??™s Budget statement tomorrow. Cable bidsare cited around the US$ 1.9460 level. Theeuro weakened vis-? -vis the British pound as the single currency testedbids around the ?‚¤0.6780 level and was capped around the ?‚¤0.6845 level.

SWISS

The Swiss franc came off vis-? -vis the U.S. dollartoday asthe greenback tested offers around the CHF 1.2160 level and was supportedaround the CHF 1.2105 level. Technically, today??™s intraday low was right around the 23.6% retracementof the move from CHF 1.2354 to CHF 1.2025. Data released in Switzerlandtoday saw February producer and import prices climb 0.3% m/m and 2.2% y/y.  Dollar offers are cited around the CHF 1.2210level.  The euro came off vis-? -vis the Swiss franc as the single currencytested bids around the CHF 1.6105 level while the British pound moved higher vis-? -vis the Swiss franc and testedoffers around the CHF 2.3790 level.

 
AUD

The Australiandollar came off marginally vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.7960 level and was capped around the $0.8030 level, a newmulti-year high. Australian dollar bids are cited around the US$ 0.7950 level.

CAD

The Canadian dollar made huge gains vis-? -vis theU.S. dollar today as the greenback tested bids around the C$ 1.1625 level and was cappedaround the C$ 1.1785 level.  Technically,today??™s intraday low was right around the 76.4% retracement of the move from C$1.1560 to C$ 1.1825.  Data released in Canada todaysaw the February consumer price index rise 2.0% y/y, up sharply from January??™s1.2% y/y increase and the highest level since September 2005. Some tradersbelieve these data will increase the chances that Bank of Canada will liftinterest rates again soon.  The federalbudget released overnight is now seen as having a chance of being accepted by Canada??™slegislature, a move that would avert early spring elections. U.S. dollar bidsare cited around the C$ 1.1570 level.