NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro appreciated vis-? -vis the U.S. dollar today as the single currencytested offers around the US$ 1.3380 level and was supported around the $1.3330level.  Technically, today??™s intraday lowwas right around the 23.6% retracement of the move from $1.3085 to $1.3410.Traders continue to sell the U.S. dollar following Friday??™s announcement thatthe U.S.is initiating trade tariffs on some Chinese products.  Data released in the U.S. today saw the March ISM manufacturingsurvey recede to 50.9 from 52.3 in February while the prices sub-index surged,the latest evidence that inflationary pressures persist in different sectors ofthe U.S.economy.  Comments from St. Louis FedPresident Poole will be closely scrutinized today.  In eurozone news, the EMU-13 PMI survey fellto 55.4 in March from 55.6 in February, below expectations and a thirteen-monthlow.  European Central Bank PresidentTrichet hawkishly said the ECB is ready to act in a ???firm and timely manner??? tocounter inflation risks but would not prejudge when further tightening mighttake place.  He added policy remains ???onthe accommodative side??? and that rates ???are still moderate.??? Euro bids arecited around the US$ 1.3335/ 1.3285 levels.

JPN/CNY

The yen gainedmarginal ground vis-? -vis the U.S. dollar today as the greenback tested bids around the ??117.45 leveland was capped around the ??118.05 level. Traders bought dollars during Australasian dealing after the Marchquarterly tankan survey came in weaker-than-expected with the largemanufacturers??™ index at +23.  Notably,capital expenditures expectations were lower in March than in December and thelarge manufacturers??™ sales price index and procurement price index both movedlower.  These data do not provide Bank ofJapan??™s Policy Board with any ammunition to raise interest rates again anytimesoon.  Most traders now believe the BoJwill keep rates unchanged through at least the end of Q3.  Canadian finance minister Flaherty said heexpects Group of Seven central bankers and finance ministers to discuss the yenwhen officials convene on 13 April.  TheNikkei 225 stock index lost 1.50% to close at ??17,028.41.  Dollar bids are cited around the ??117.45/ 15levels.  The euro gained marginal ground vis-? -vis the yen as the singlecurrency tested offers around the ??157.60 level and was supported around the??156.95 level. The British pound andSwiss franc appreciated vis-? -vis the yen as the crosses tested offersaround the ??233.10 and ??97.15 levels, respectively.  TheChinese yuan depreciated vis-? -vis the U.S. dollar as the greenback closedat CNY 7.7340 in the over-the-counter market, up from CNY 7.7302.  Traders continue to assess the fallout fromthe Bush administration??™s announcement on Friday that it is imposing dutiesbetween 10.9% and 20.3% on certain Chinese imported paper products.  Some traders are concerned the protectionistmeasures may result in a decrease of Chinese purchases of U.S. assetssecurities, resulting in a decline in the U.S. dollar.  Data released in China today saw CFLP March manufacturingPMI survey improve to 56.1 from 53.1 while the CLSA manufacturing PMI surveyfell to 52.3 from 53.0.

STERLING

The British pound scored major ground vis-? -vis theU.S. dollar today as cable tested offers around the US$ 1.9800 figure and was supportedaround the $1.9660 level.  Technically,today??™s intraday low was right around the 23.6% retracement of the move from$1.8835 to $1.9845.  Sterling appreciated on a weekend newspaperreport that Bank of England??™s Monetary Policy Committee will tighten interestrates on Thursday.  Notably, the ShadowMonetary Policy Committee reported ???the case for a rate hike this week isoverwhelming.??? Data released in the U.K. today saw the Marchmanufacturing PMI survey fall to 54.4 from 55.4.  Also, Q4 mortgage equity withdrawal rose to?‚¤14.6 billion from ?‚¤12.2 billion in Q3. Cable bids are cited around the US$ 1.9740 level.  Theeuro weakened vis-? -vis the British pound as the single currency testedbids around the ?‚¤0.6755 level and was capped around the ?‚¤0.6790 level.

SWISS

The Swiss franc appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the CHF 1.2120 level and was capped aroundthe CHF 1.2175 level.  Data released in Switzerlandtoday saw the March PMI survey decline to 62.0 from 63.5 in February.  Swiss National Bank member Hildebrand todaysaid the central bank??™s interest rate policy continues to have an expansionaryeffect on the Swiss economy.  Dollaroffers are cited around the CHF 1.2195 level. The euro and British pound gained ground vis-? -vis the Swiss francas the crosses tested offers around the CHF 1.6235 and CHF 2.4025 levels,respectively.

AUD

The Australian dollar gained significant groundvis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8180level and was supported around the $0.8080 level.  The pair reached its highest level sinceOctober 1990.  Many traders arespeculating Reserve Bank of Australiawill lift interest rates overnight.  Datareleased in Australiatoday saw February retail sales up 0.9% m/m while February building approvals gained10.6% m/m.  Australian dollar bids arecited around the US$ 0.8125 level.

CAD

The Canadian dollar lost ground vis-? -vis the U.S.dollar todayas the greenback tested offers around the C$ 1.1570 level and was supportedaround the $1.1510 level.  Technically,today??™s intraday low was right around the 38.2% retracement of the move from$1.0925 to $1.1875.  U.S. dollar bids arecited around the C$ 1.1400 figure.