NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro depreciatedvis-? -vis the U.S. dollar today asthe single currency tested bids around the US$ 1.3345 level and was cappedaround the $1.3410 level.  The commoncurrency today traded at its highest level since March 2005 and was inspired byyesterday??™s Federal Open Market Committee interest rate announcement. The Fedkept the federal funds target rate unchanged at 5.25% and moved closer to aneutral bias from its long-standing tightening bias. The FOMC reported ???The Federal Open MarketCommittee decided today to keep its target for the federal funds rate at 5-1/4percent.  Recent indicators have beenmixed and the adjustment in the housing sector is ongoing. Nevertheless, theeconomy seems likely to continue to expand at a moderate pace over comingquarters. Recent readings on core inflation have been somewhat elevated.Although inflation pressures seem likely to moderate over time, the high levelof resource utilization has the potential to sustain those pressures. In thesecircumstances, the Committee's predominant policy concern remains the risk thatinflation will fail to moderate as expected. Future policy adjustments willdepend on the evolution of the outlook for both inflation and economic growth,as implied by incoming information.???  Notably, the FOMC detailed possible???adjustments??? to rates rather than a ???firming??? in rates but it is clear the Fedis still more concerned with inflation than it is with slower growth.  Traders will pay close attention to remarksfrom Fed Chairman Bernanke today along with other Fed policymakers.  Data released in the U.S. today sawFebruary leading economic indicators off 0.5% while weekly initial joblessclaims were off 4,000 to 316,000 and continuing jobless claims were off 69,000to 2,501,000. In eurozone news, German finance minister Steinbrueck called theGerman economic outlook for 2007 and 2008 ???very good.??? Data released in theeurozone today saw the EMU-13 January trade balance at -?‚¬7.8 billion comparedwith a +?‚¬3.2 billion surplus in December. Also, EMU-13 January industrial new orders were off 0.2% m/m and up12.0% y/y.  Euro bids are cited aroundthe US$ 1.3245 level.

JPN/CNY

The yen depreciatedmarginally 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 right around the 38.2% retracementof the move from ??115.15 to ??118.50. Data released in Japanovernight saw the February trade surplus climb 7.7% y/y to ??979.58 billionwhile February supermarket sales were down 1.6% y/y.  Also, business sentiment in the January ??“March quarter declined for the second consecutive quarter, falling to 6.2 from6.4, while land prices rose for the first time in sixteen years in 2006.  Bank of Japan Governor Fukui testifiedovernight and said the central bank can help the economy by keeping rates verylow ???for now.???  The Nikkei 225 stockindex gained 1.49% to close at ??17,419.20. Dollar bids are cited around the ??116.65 level. The euro came off marginally vis-? -vis the yen as the singlecurrency tested bids around the ??156.80 level and was capped around the ??157.50level. The British pound and Swiss francappreciated vis-? -vis the yen as the crosses tested offers around the??232.25 and ??97.30 levels, respectively. The Chinese yuan appreciatedsharply vis-? -vis the U.S. dollar as the greenback closed at CNY 7.7266 inthe over-the-counter market, down from CNY 7.7340, a post-revaluation low.

STERLING

The British pound gained ground vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9725 level and was supported around the US$ 1.9660 level.Technically, today??™s intraday low was right around the 23.6% retracement of themove from $1.8835 to $1.9915.  Datareleased in the U.K.today saw the CBI??™s total manufacturing order book escalate to +8% in Marchfrom February??™s +4 level, the highest reading since May 1995. The averageprices balance rose to its highest level since March 1995 and the balance forthe consumer goods sector reached its highest level since April 1990.  These data evidence the continued recovery inthe U.K.manufacturing sector.  Also, Februaryretail sales were up 1.4% m/m and 4.9% y/y. Chancellor Brown??™s ???fiscally-neutral???Budget for fiscal year 2007-2008 that was released yesterday includes ???majortax reforms??? including a 2% cut in income and corporate taxes.  Cable bids are cited around the US$ 1.9635/1.9550 levels. The euro weakenedvis-? -vis the British pound as the single currency tested bids around the?‚¤0.6775 level and was capped around the ?‚¤0.6810 level.

SWISS

The Swissfranc depreciated vis-? -vis the U.S. dollar today as the greenback testedoffers around the CHF 1.2140 level and was supported around the CHF 1.2075level.  Dollar offers are cited aroundthe CHF 1.2155/ 85 levels.  The euro came off vis-? -vis the Swissfranc as the single currency tested bids around the CHF 1.6170 level while the British pound appreciated vis-? -visthe Swiss franc and tested offers around the CHF 2.3880 level.

AUD

The Australiandollar came off marginally vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.8055 level and was capped around the $0.8090 level.  Today??™s intraday high represents the pair??™sstrongest showing since December 1996. Many traders believe Reserve Bank of Australia maylift interest rates as early as next month. Australian dollar bids are citedaround the US$ 0.7980 level.

CAD

The Canadian dollar came off vis-? -vis the U.S.dollar todayas the greenback tested offers around the C$ 1.1590 level and was supportedaround the C$ 1.1550 level.  Technically,today??™s intraday high was just above the 23.6% retracement of the move from C$1.1785 to C$ 1.1530.  U.S. dollar bidsare cited around the C$ 1.1450 level.