NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro came off marginally vis-? -vis the U.S. dollar today as the single currencytested bids around the US$ 1.3415 level and was capped around the $1.3440level.  Today??™s range was very limited astraders were reluctant to put on new positions ahead of the release of theFederal Open Market Committee??™s March meeting minutes.  The Fed??™s statement evidenced someindications that it was moving away from its tightening bias but pricepressures remain evident in the U.S.economy and if the minutes show significant concern with inflation, the U.S.dollar could benefit.  The InternationalMonetary Fund reduced its U.S.growth forecast for 2007 to 2.2% from 2.9%. Also, the National Association of Realtors lowered its forecast forexisting home sales to -2.2% and new home sales to -14.2% for 2007. In eurozonenews, most traders believe the European Central Bank will not tighten monetarypolicy tomorrow when its interest rate decision is announced.  Data released in Germany today saw March wholesaleprices rise 0.5% m/m and 3.1% y/y.  Eurobids are cited around the US$ 1.3365 level.

JPN/CNY

The yendepreciated vis-? -vis the U.S. dollar today as the greenback tested offers vis-? -vis the ??119.50 level and wassupported around the ??118.85 level.  Thepair reached its highest level since 27 February as traders put on more shortyen carry trades ahead of the Group of Seven meeting later this week.  Data released in Japan today saw February coreprivate sector machinery orders fall 5.2% m/m to ??1.04 trillion, down fromJanuary??™s 3.9% gain.  Also, the Februarycurrent account surplus rose 4.9%, the March money supply expanded 1.1% y/y,March bank lending was up 1.1% y/y, and March corporate failures climbed 12.0%y/y.  Bank of Japan executive directorInaba said ???Should short-term interest rates be kept at extremely low levels for a longperiod of time, inflation expectations and concerns in the markets would emergeand could push up long-term interest rates.??? Most traders believe the BoJ willnot hike rates again until after the July elections in Japan.   The International Monetary Fund today liftedits GDP forecast for Japanin 2007 from 2.1% to 2.3%.  The IMFyesterday estimated that short yen carry trades totaled US$ 170 billion lastyear. The Nikkei 225 stock index gained 0.03% to close at ??17,670.07. Dollarbids are cited around the ??118.30 level. The euro moved highervis-? -vis the yen as the single currency tested offers around the ??160.40 leveland was supported around the ??159.60 level. The British pound and Swiss franc moved higher vis-? -vis the yen asthe crosses tested offers around the ??236.25 and ??97.95 levels,respectively. 

STERLING

The British pound moved higher vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9815 level and was supported around the $1.9710 level.  Data released in the U.K. today sawMarch BRC like-for-like retail sales climb 3.9% y/y, the fastest increase innearly one year.  Also, sterling waslifted after a report surfaced that the U.K. Treasury is planning a taxexemption on dividends earned overseas. Cable bids are cited around the US$ 1.9670 level. The euro weakened vis-? -vis the British pound as the single currencytested bids around the ?‚¤0.6775 level and was capped around the ?‚¤0.6810 level.

SWISS

The Swissfranc weakened vis-? -vis the U.S. dollar today as the greenback testedoffers around the CHF 1.2215 level and was supported around the CHF 1.2165level.  Dollar offers are cited aroundthe CHF 1.2280 level. The euro andBritish pound moved higher vis-? -vis the Swiss franc as the crosses testedoffers around the CHF 1.6395 and CHF 2.4145 levels, respectively.

AUD

The Australiandollar came off vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.8235 level and was around the $0.8265 level. Data released in Australia todaysaw February housing finance rise 0.3% m/m. Also, traders cited talk that Mexican cement giant Cemex SAB de CV is increasingits takeover offer for Australian construction materials company RinkerGroup.  Australian dollar bids are citedaround the US$ 0.8220/ 0.8190 levels.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1430 level and was capped aroundthe $1.1480 level.  Today??™s intraday lowwas the pair??™s weakest showing since 20 December 2006. Data released in Canada todaysaw March housing starts up 7.6% m/m to 210,900 units. U.S. dollar bids are citedaround the C$ 1.1400 figure.