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$ 1.3290 level and was capped around the $1.3340level.  Technically, today??™s intraday lowis just above the 38.2% retracement of the move from $1.3085 to $1.3410.  Traders continue to reassess the Federal OpenMarket Committee??™s policy statement from two days ago wherein Fed officials notedpolicy ???adjustments??? may be needed, a departure from the policy ???firming???mentioned in the previous ???FOMC??? statement. By and large, traders are nowconcluding the Fed may not be as neutral as it was perceived to be on Wednesdayand this has led to some further dollar appreciation.  Fed officials who spoke yesterday did notoffer insight into interest rate policy but Fed Chairman Bernanke is expectedto testify next week before a Joint Economic Committee and his views on thesub-prime mortgage market meltdown and other issues will be closelyparsed.  Data released in the U.S. today sawFebruary existing home sales climb 3.9% to 6.69 million units and were off 1.3%y/y.  These data suggest there may besome positive moderation in the U.S.housing sector and this would also reduce the need for the Fed to lower ratesthis year.  In eurozone news, outgoingEuropean Central Bank member Gaspari was quoted as saying eurozone inflation isunder control and that it is premature to discuss further monetarytightening.  ECB member Stark urged eurozonecountries to reduce public spending further. Data released in the eurozone today saw the EMU-13 January currentaccount surplus print at ?‚¬2.7 billion, up from ?‚¬2.0 billion in December, whilethe German import price index rose 0.5% m/m and 0.8% y/y. Euro bids are citedaround the US$ 1.3245 level.

JPN/CNY

The yen appreciatedvis-? -vis the U.S. dollar today asthe greenback tested bids around the ??117.40 level and was capped around the??118.25 level.  Technically, today??™sintraday low was right around the 61.8% retracement of the move from ??114.45 to??122.15.  Data released in Japan overnightsaw foreign investors as net sellers of Japanese equities for the thirdconsecutive week.  Bank of Japan GovernorFukui this week make it very clear that the central bank does not have anyplans to raise interest rates soon.  Sometraders may continue to put on short yen carry trades to invest proceeds inhigher yielding foreign assets but the recent increase in global risk premiumsmay discourage other traders from selling the yen.  The Nikkei 225 stock index climbed 0.35% toclose at ??17,480.61.  Dollar bids arecited around the ??116.65 level. The euroweakened vis-? -vis the yen as the single currency tested bids around the??156.40 level and was capped around the ??157.60 level. The British pound and Swiss franc depreciated vis-? -vis the yen asthe crosses tested bids around the ??230.45 and ??96.70 levels,respectively.  The Chinese yuan depreciated vis-? -vis the U.S. dollar as thegreenback closed at CNY 7.7280 in the over-the-counter market, up from CNY7.7266. 

STERLING

The British pound came off vis-? -vis the U.S. dollartoday ascable tested bids around the US$ 1.9585 level and was capped around the $1.9690level.  Stops were reached below the$1.9595 level, representing the 23.6% retracement of the move from $1.9180 to$1.9725.  This week??™s strong consumerprice inflation data make it possible the Bank of England Monetary PolicyCommittee will tighten interest rates again in Q2.  Cable bids are cited around the US$ 1.9535level.  The euro came off marginally vis-? -vis the British pound as thesingle currency tested bids around the ?‚¤0.6765 level and was capped around the?‚¤0.6790 level.

 
SWISS

TheSwiss franc weakened vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2185level and was supported around the CHF 1.2110 level.  Technically, today??™s intraday low was rightaround the 23.6% retracement of the move from CHF 1.2355 to CHF 1.2035.  Swiss National Bank member Jordan spokeyesterday and said ?????¦the normalization of monetary policy is not completed yet??¦ However, giventhe weaker inflation forecast, the need for action has become smaller.??? Dollaroffers are cited around the CHF 1.2085 level. The euro and British pound movedhigher vis-? -vis the Swiss franc as the crosses tested offers around theCHF 1.6195 and CHF 2.3910 levels, respectively. 

AUD

The Australiandollar came off vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.8040 level and was capped around the $0.8075 level.  The pair continues to establish freshdecade-long highs on the premise that Reserve Bank of Australia maylift interest rates further as early as next month.  Australian dollar bids are cited around theUS$ 0.8025/ 0.7985 levels.

CAD

The Canadian dollar weakened marginally vis-? -visthe U.S. dollar today as the greenback tested offers around the C$ 1.1590 level and wassupported around the C$ 1.1560 level.  Thepair has lost about 155 pips this week and expectations of a possible Bank ofCanada rate hike are fueling the pair??™s gains. U.S. dollar bids are cited around the C$ 1.1510/ 1.1395 levels.