NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro appreciated sharply vis-? -vis the U.S. dollar today as the single currencytested offers around the US$ 1.3440 level and was supported around the US$1.3350 level.  The pair reached itshighest level since March 2005 and traders are fixating on thepsychologically-important US$ 1.3500 figure. The dollar??™s shot-in-the-arm following last week??™s strong Marchnon-farms payrolls report has diminished. Dealers are contemplating to what extent this weekend??™s Group of Sevenmeeting of central bankers and finance ministers in Washington, D.C.will focus on exchange rates and whether any market-moving statements will bemade. The likely suspects include the yen and the Chinese yuan, especially asthe former reaches all-time lows vis-? -vis the euro.  Data released in the U.S. today sawRedbook retail sales climb +1.0% m/m in March. In eurozone news, data releasedin Germanytoday saw the February trade surplus narrow to ?‚¬14.2 billion from ?‚¬16.2 billionin January. Also, French industrial output expanded 1.1% m/m in February.  Many Fed officials are scheduled to speaktoday and this week. Euro bids are cited around the US$ 1.3300 figure.

JPN/CNY

The yenappreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the ??118.75 level and was cappedaround the ??119.35 level.  Technically,today??™s intraday low was just above the 23.6% retracement of the move from??116.35 to ??119.40.  As expected, Bank ofJapan??™s Policy Board kept interest rates unchanged and BoJ Governor Fukuiwarned that core inflation may hover near zero per cent for quite some time.The central bank noted ???Japan??™seconomy is expanding moderately??? and Fukuisaid there is a ???low possibility??? that interest rate adjustments can be takenaccording to a ???pre-set schedule.???  Fukui also indicated theBoJ does not see short yen carry trades resuming anytime soon and said theforeign exchange market ???has been calm recently.???  The Nikkei 225 stock index lost 0.45% toclose at ??17,664.69.  Dollar bids arecited around the ??118.45 level. The eurogained ground vis-? -vis the yen as the single currency tested offers aroundthe ??160.10 level and was supported around the ??159.05 level. The British pound and Swiss franc pressedhigher vis-? -vis the yen as the crosses tested offers around the ??235.35and ??97.90 levels, respectively.  The Chinese yuan depreciated vis-? -visthe U.S. dollar as the greenback closed at CNY 7.7350 in the over-the-countermarket, up from CNY 7.7340.  A trade waris brewing between the U.S.and Chin as the U.S. todayfiled two new complaints against China at the World TradeOrganization. Chinaindicated it is ???strongly dissatisfied??? with this move by the U.S.  Traders are concerned China could stop purchasing U.S. assetswith its massive foreign reserves war chest and this would lead to a downturnin the U.S. dollar. Data released in China today saw the March tradesurplus print at US$ 6.87 billion, the lowest print since February 2007, whilethe Q1 trade surplus reached US$ 46.44 billion, up from Q1 2006??™s US$ 23.31billion level.

STERLING

The British pound rocketed higher vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9750 level and was supported around the US$ 1.9610 level.  Technically, today??™s intraday high was justabove the 76.4% retracement of the move from $1.9915 to $1.9180.  Many traders continue to expect Bank ofEngland??™s Monetary Policy Committee will lift interest rates next month.  Tomorrow??™s BRC retail sales monitor, if firm,could bolster the likelihood of another monetary tightening in May.  Traders cited significant M&A talktoday.  Cable bids are cited around theUS$ 1.9635 level.  The euro gained marginal ground vis-? -vis the British pound as thesingle currency tested offers around the ?‚¤0.6820 level and was supported aroundthe ?‚¤0.6795 level.

SWISS

The Swiss franc gained significant ground vis-? -visthe U.S. dollar today as the greenback tested bids around the CHF 1.2145 level and wascapped around the CHF 1.2270 level.  Technically,today??™s intraday high was just below the 61.8% retracement of the move from CHF1.2435 to CHF 1.2025.  Data released in Switzerlandtoday saw the March unemployment rate fall to 3.0% from 3.2% in February.  Dollar offers are cited around the CHF 1.2235level.  The euro and British pound depreciated vis-? -vis the Swiss franc asthe crosses tested bids around the CHF 1.6330 and CHF 2.3970 levels,respectively.

AUD

TheAustralian dollar moved higher vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8255level and was supported around the US$ 0.8155 level.  Today??™s intraday high is the pair??™s strongestshowing since October 1990.  Datareleased in Australiatoday saw the March NAB business confidence index fall to +10 from +12 inFebruary.  Also, ANZ March jobadvertisements were up 1.9% m/m and 24.7% y/y. Australian Treasurer Costello today reported ???Australia is now in the longestperiod of continuous economic expansion ever recorded, unemployment is at30-year lows, and inflation is moderate.??? Australian dollar bids are cited around the US$ 0.8120 level.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1455 level and was capped aroundthe C$ 1.1530 level.  Technically,today??™s intraday low was right around the 50% retracement of the move from C$1.1030 to C$ 1.1875.  March housingstarts data will be released tomorrow. U.S. dollar offers are cited around the C$ 1.1510 level.