NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro was little-changed vis-? -vis the U.S. dollar today as the single currencytested bids around the US$ 1.3350 level and was capped around the $1.3380level.  Today??™s intraday range wasrelatively narrow and technically, today??™s intraday low was right around the61.8% retracement of the move from$1.3410 to $1.3255.  Data released in theU.S.today saw the February pending home sales index improve to 109.3 from 108.5 butwas off 8.5% y/y.  Traders are alreadytalking about Friday??™s March non-farms payroll report to assess the health ofthe U.S.labour market. Other data released today saw Redbook chain store sales climb0.4% m/m in the first four weeks of March.  St. Louis Fed President Poole last nighthawkishly said ???If the central bank is perceived as unwilling to underwrite higherinflation and prepared to pursue policies consistent with lower inflation, thenexpectations and actual inflation will fall.??? Poolealso reiterated his support for an inflation target and prefers a coreinflation rate around 1.5%.  In eurozonenews, EMU-13 February producer price inflation was up 0.3% m/m and 2.9% y/y.Most traders believe the European Central Bank will not change interest rateswhen policymakers convene this month. Euro bids are cited around the US$ 1.3285 level.

JPN/CNY

The yen depreciatedvis-? -vis the U.S. dollar today asthe greenback tested offers around the ??118.80 level and was supported aroundthe ??117.70 level.  Technically, today??™sintraday low was right around the 23.6% retracement of the move from ??115.15 to??118.50.  The short yen carry traderemains alive and well, especially after last week??™s soft Japanese consumerprice inflation data and rate hike jitters involving Reserve Bank of Australia andBank of England.  Most traders expectBank of Japan??™s Policy Board will reiterate its low interest rate regime on 10April.  Data released in Japan today sawthe March monetary base decline 19.1% y/y, the thirteenth consecutive monthlydecline.  The Nikkei 225 stock index gained1.27% to close at ??17,244.05.  Dollarbids are cited around the ??117.70 level. The euro moved highervis-? -vis the yen as the single currency tested offers around the ??158.81 leveland was supported around the ??157.35 level. The British pound and Swiss francgained ground vis-? -vis the yen as the crosses tested offers around the??234.80 and ??97.50 levels, respectively. The Chinese yuan appreciatedvis-? -vis the U.S. dollar as the greenback closed at CNY 7.7315 in theover-the-counter market, down from CNY 7.7340. 

STERLING

The British pound lost marginal ground vis-? -vis the U.S. dollar today as cable tested bids aroundthe US$ 1.9740 level and was capped around the $1.9820 level.  Technically, today??™s intraday low was rightaround the 76.4% retracement of the move from $1.9915 to $1.9180.  Sterlingreached its highest level since 24 January. Many traders continue to speculate Bank of England??™s Monetary PolicyCommittee will lift interest rates by +25bps to 5.50% on Thursday.  The futures market is pricing about a 50%chance the MPC will tighten rates on Thursday. Data released in the U.K.today saw the March construction sector PMI survey rise to 58.9, the highestlevel since December 2003.  Tomorrow??™sservice sector PMI survey will be closely scrutinized.  Cable bids are cited around the US$ 1.9660level.  The euro was little changed vis-? -vis the British pound as thesingle currency tested bids around the ?‚¤0.6750 level and was capped around the?‚¤0.6765 level.

SWISS

The Swiss franc weakened vis-? -vis the U.S. dollartoday asthe greenback tested offers around the CHF 1.2190 level and was supportedaround the CHF 1.2145 level.  Technically,today??™s intraday low was just below the 23.6% retracement of the move from CHF1.2570 to CHF 1.2025 level.  Datareleased in Switzerlandtoday saw March CPI up 0.1% m/m and 0.2% y/y. Also, KOF lifted its 2007 GDP forecast to 2.4% from 2.1% and to 3.5% for2008 from 1.5%.  Dollar offers are citedaround the CHF 1.2235 level.  The euro and British pound appreciatedvis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.6290and CHF 2.4100 figures, respectively.

AUD

The Australian dollar weakened vis-? -vis the U.S.dollar todayas the Aussie tested bids around the US$ 0.8120 level and was capped around the$0.8170 level.  The pair continues totrade near decade-high levels on expectations that Reserve Bank of Australia willlift its key cash rate by +25bps to 6.50% today.  Data released in Australia today saw the Februarytrade deficit expand to ??“A$ 838 million from ??“A$ 832 million. Australian dollarbids are cited around the US$ 0.8060 level.

CAD

The Canadian dollar weakened marginally vis-? -visthe U.S. dollar today as the greenback tested offers around the C$ 1.1585 level and wassupported around the C$ 1.1550 level.  Tradersawait the release of Canadian employment data on Thursday preceded by Februarybuilding permits data tomorrow.  U.S.dollar bids are cited around the C$ 1.1510 level.