NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The eurocame off vis-? -vis the U.S. dollar todayas the single currency tested bids around the US$ 1.3290 level and was cappedaround the $1.3320 level.  Price activitywas limited during the Australasian and European sessions on account of today??™sinterest rate decision and statement from the Federal Open MarketCommittee.  Most traders believe the Fedwill keep its federal funds target rate at 5.25% and the Fed??™s statement willbe scrutinized. One school of thought suggests the Fed will acknowledge therecent unrest in the sub-prime mortgage market and delicately suggest it may beready to lower rates later this year. Another school of thought suggests the Fed cannot afford to intimate itmay reduce borrowing costs this year, especially as consumer and producerprices remain elevated.  In eurozonenews, European Central Bank President Trichet hawkishly said ???Our monetary policy, asfar as we see it, continues to be on the accommodative side with the key ECBinterest rates moderate, money and credit growth vigorous and liquidity ampleby all plausible measures??? adding economic growth remains ???robust.??? Trichet??™scomments make it clear that the ECB remains in a tightening mode, although mosttraders do not expect the central bank to lift borrowing costs in April.  Euro bids are cited around the US$ 1.3245level.

JPN/CNY

The yendepreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??117.90 level and wassupported around the ??117.20 level.  Technically,today??™s intraday low was just above the 38.2% retracement of the move from??109.00 to ??122.15.  Financial marketswere closed in Japantoday for the vernal equinox holiday and will reopen overnight.  Today??™s Federal Open Market Committeestatement could impact the unwinding of short yen carry trades, especially ifthe Fed intimates it may reduce interest rates later in the year.  Dollar bids are cited around the ??116.65level.  The euro gained ground vis-? -vis the yen as the single currencytested offers around the ??156.80 level and was supported around the ??156.05level.  The British pound and Swiss franc appreciated vis-? -vis the yen asthe crosses tested offers around the ??231.15 and ??97.10 levels,respectively.  The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenbackclosed at CNY 7.7340 in the over-the-counter market, down from CNY 7.7375 and apost-yuan revaluation low.  People??™s Bankof ChinaGovernor Zhou said the PBOC ???worries about the trend of inflation but not thecurrent level of inflation.???

STERLING

The British pound came off vis-? -vis the U.S. dollartoday ascable tested bids around the US$ 1.9555 level and was capped around the $1.9650level.  Technically, today??™s intraday lowwas right around the 76.4% retracement of the move from $1.9670 to $1.9180.  Sterlingweakened after the Bank of England Monetary Policy Committee meeting minutesfrom March were released and were more dovish than expected.  The markets anticipated a vote of 7-to-2 tokeep rates unchanged with two opting for a hike and the actual tally was 8-to-1with Blanchflower voting for a cut in rates. Some traders are not reading too much into today??™s minutes because theMPC did not have yesterday??™s very hot inflation data at their disposal at theirMarch meeting.  MPC member Barker said???short-term uncertainty??? in inflation resulting from the energy market couldresult in ???more frequent interest rate changes.???  Traders await the Budget statement fromChancellor of the Exchequer Brown this afternoon. Cable bids are cited aroundthe US$ 1.9460 level.  The euro gained marginal groundvis-? -vis the British pound as the single currency tested offers around the?‚¤0.6805 level and was supported around the ?‚¤0.6775 level.

SWISS

The Swiss franc weakened vis-? -vis the U.S. dollartoday asthe greenback tested offers around the CHF 1.2160 level and was supportedaround the CHF 1.2115 level.  Technically,today??™s intraday high was right around the 38.2% retracement of the move fromCHF 1.2350 to CHF 1.2025.  Data releasedin Switzerlandtoday saw the trade surplus expand to CHF 1.381 billion in February from CHF1.271 billion in January.  Dollar offersare cited around the CHF 1.2210 level.  The euro and British pound moved highervis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.6160and CHF 2.3820 levels, respectively.

AUD

The Australian dollar moved lower vis-? -vis the U.S.dollar todayas the Aussie tested bids around the psychologically-important US$ 0.8000figure and was capped around the $0.8040 level. Many traders believe Reserve Bank of Australia will tighten interestrates again as early as next month.  Datareleased in Australiatoday saw the March skilled vacancies index fall 2.0% m/m.  Also, the Westpac January leading index wasup 4.8% y/y, down from December??™s 5.4% y/y result. Australian dollar bids arecited around the US$ 0.7945 level.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1585 level and was capped aroundthe C$ 1.1630 level.  Data released in Canada todaysaw January retail sales fall 0.2% m/m with the ex-autos component up 0.3%.Traders are still talking about yesterday??™s February CPI data that saw theannual core inflation rate jump 2.4% from January??™s 2.1% rate.  U.S. dollar offers are cited around the C$1.1655 level.