NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

Theeuro gained ground vis-? -vis the U.S. dollar today as the single currency tested offers around the US$1.3345 level and was supported around the $1.3255 level.  Technically, today??™s intraday low was justabove the 76.4% retracement of the move from $1.3365 to $1.2865.  Data released in the U.S. today saw Februarynew home sales off 3.9%, an improvement from January??™s revised 15.8% decline,whole February building permits were unrevised at -2.5%. These data evidencethe mixed housing data that continue to print in the U.S. but the volatility of thesedata should not be underestimated. Federal Reserve Chairman Bernanke testifies on Wednesday and is likelyto weigh in on the U.S.housing sector and sub-prime U.S.mortgage market.  Traders will also be curiousto see if Bernanke comments on the Fed??™s current policy stance, as most tradersinterpreted the Federal Open Market Committee??™s announcement last week as beingless hawkish than previous biases.  Otherdata released in the U.S.today saw the Chicago Fed February national activity index print at +0.03, upfrom -0.72 in January.  In eurozone news,European Union finance ministers will convene tonight and tomorrow and anycomments they offer about exchange rates or monetary policy ??“ the EuropeanCentral Bank??™s domain ??“ will be closely watched.  ECB member Bini-Smaghi hawkishly said the ECB???must pointout the (inflation) risks, and we must act to eliminate these risks.???   Data released in France today saw the March businessconfidence indicator index rise to 109 from 108 in January, aboveexpectations.  Euro bids are cited aroundthe US$ 1.3245 level.

JPN/CNY

The yen appreciatedvis-? -vis the U.S. dollar today asthe greenback tested bids around the ??117.75 level and was capped around the??118.40 level.  Technically, today??™s intradaylow was right around the 23.6% retracement of the move from ??115.15 to??118.50.  Bank of Japan GovernorFukui testified the central bank will maintain its accommodative monetarypolicy and said the government should have ???finely tuned??? policies. Minutesfrom the February Bank of Japan Policy Board meeting were released overnight inwhich one policymakers said an April rate hike ???would not be too late??? insteadof the +25bps hike from a few weeks ago. Consumer price inflation data to bereleased on Friday will be closely watched to see if they move higher ??“possibly giving the BoJ more ammunition to raise rates again this year. TheNikkei 225 stock index climbed 0.24% to close at ??17,521.96.  Dollar bids are cited around the ??117.15level.  The euro moved higher vis-? -vis the yen as the single currencytested offers around the ??157.35 level and was supported around the ??156.30level. The British pound and Swiss francgained ground vis-? -vis the yen as the crosses tested offers around the??232.70 and ??97.15 levels, respectively. The Chinese yuan came offvis-? -vis the U.S. dollar as the greenback closed at CNY 7.7382 in theover-the-counter market, up from CNY 7.7280. Data released in Chinatoday saw February retail sales climb 16.9% y/y, its fastest pace since May2004.  Standard Chartered reiterated aprevious forecast that the yuan will appreciate some 4% this year. LehmanBrothers and HSBC see China??™seconomy expanding 9.8% and 10.0% this year, respectively.

STERLING

The British pound appreciated vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9720 level and was supported around the $1.9570 level.  Data released in the U.K. today saw March Hometrack house pricesescalate higher by a near four-year record rate and these data evidence theresiliency of the U.K.housing market after Bank of England Monetary Policy Committee??™s recentmonetary tightenings. Cable bids are cited around the US$ 1.9635/ 1.9550levels. The euro moved highervis-? -vis the British pound as the single currency tested offers around the?‚¤0.6780 level and was supported around the ?‚¤0.6755 level.

SWISS

 The Swissfranc appreciated vis-? -vis the U.S. dollar today as the greenback testedbids around the CHF 1.2115 level and was capped around the CHF 1.2225level.  Technically, today??™s intradayhigh was right around the 61.8% retracement of the move from CHF 1.2350 to CHF1.2035.  Dollar offers are cited aroundthe CHF 1.2210 level.  The euro and British pound werelittle-changed vis-? -vis the Swiss franc as the crosses tested offersaround the CHF 1.6215 and CHF 2.4000 levels, respectively.

AUD

 The Australiandollar extended recent gains vis-? -vis the U.S. dollar today as the Aussie tested offersaround the US$ 0.8105 level and was supported around the $0.8030 level.  Data released in Australia today saw the Q1performance of manufacturing index decline to +6% from +17% in Q4. Westpacreported Reserve Bank of Australiabelieves additional monetary tightening will not hurt households.  Many traders believe RBA will lift ratesagain as early as next month.  Australiandollar bids are cited around the $0.8035 level. 

CAD

The Canadian dollar lost ground vis-? -vis the U.S.dollar todayas the greenback tested offers around the C$ 1.1635 level and was supportedaround the C$ 1.1590 level. Technically, today??™s intraday high was just belowthe 38.2% retracement of the move from C$ 1.1825 to C$ 1.1530.  GDP data will be released on Friday.  U.S. dollar bids are cited around the C$1.1510 level.