NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro gained ground vis-? -vis the U.S. dollar today as the single currencytested offers around the US$ 1.3575 level and was supported around the $1.3540level.  Today??™s intraday high representsa fresh high dating back to January 2005. There was little in the Group of Seven??™s communiqu?© to alter traders??™recent view that the U.S. dollar will depreciate.  Data released in the U.S. today saw Marchheadline retail sales print at +0.7%, above expectations, while the ex-autoscomponent climbed +0.8%, also above expectations.  Also, the Empire Statemanufacturing index climbed to 3.80 in April from 1.85 in March.  Other data released today saw February netoverall capital inflows climb to US$ 94.5 billion from US$ 79.6 billion inJanuary while February business inventories were up 0.3%, their fastest pace infive months. Traders await U.S.consumer price inflation data tomorrow. In eurozone news, German CPI expanded 0.3% m/m and 1.9% y/y in March andEMU-13 CPI was up 1.9% in March from 1.8% in February.  Most traders continue to expect the EuropeanCentral Bank will tighten monetary policy in June.  Euro bids are cited around the US$ 1.3480level.

JPN/CNY

The yendepreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??119.65 level and wassupported around the ??118.95 level.  Technically,today??™s intraday low was just below the 23.6% retracement of the move from??109.00 to ??122.15.  Finance minister Omidownplayed the role of exchange rates in adjusting global imbalances saying ???trying to adjust suchimbalances exclusively through changes in exchange rates would becounterproductive??? and would have ???adverse effects.???  The Group of Seven??™s communiqu?© this weekendwas mostly benign with only an indirect reference to short yen carry trades.The G7 reported ???Japan'srecovery is on track and expected to continue. We remain confident that theimplications of these developments will be recognized by market participantsand will be incorporated in their assessment of risks."  European finance ministers also did notpublicly comment on the yen??™s value.  Thegovernment maintained its overall economic assessment unchanged this month anddata released in Japan today saw revised February industrial output up 0.7%m/m.  The Nikkei 225 stock index gained1.52% to close at ??17,628.30.  Dollarbids are cited around the ??118.80/ 50 levels. The euro moved higher vis-? -vis the yen as the single currencytested offers around the ??162.40 level and was supported around the ??161.45level. The British pound and Swiss francgained ground vis-? -vis the yen as the crosses tested offers around the??238.25 and ??98.65 levels, respectively. TheChinese yuan weakened vis-? -vis the U.S. dollar as the greenback closed atCNY 7.7302 in the over-the-counter market, up from CNY 7.7217.

STERLING

The British pound gained ground vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9940 level and was supported around the $1.9855 level.  Cable??™s intraday print represents itsstrongest showing since October 1992. Data released in the U.K. today saw theApril Rightmove house price index climb 3.6% m/m and 15% y/y while a governmentreport confirmed February house prices were up 12.1% y/y. Additionally, Marchoutput producer prices climbed 0.6% m/m and 2.7% y/y and input prices were up1.2% m/m and 0.7% y/y. The gains in output prices are likely to concern Bank ofEngland Monetary Policy Committee members and this could result in a rate hikenext month.  Cable bids are cited aroundthe US$ 1.9845 level.  The euro came off marginally vis-? -visthe British pound as the single currency tested bids around the ?‚¤0.6800 figureand was capped around the ?‚¤0.6830 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 1.2145level.  Technically, the pair orbited theCHF 1.2125 level, representing the 23.6% retracement of the move from CHF1.2435 to CHF 1.2025.  Swiss NationalBank Chairman Roth spoke today and reiterated the central bank has to bevigilant ???as the weak Swiss franc and falling unemployment could pose a risk toprice stability.???  Dollar offers arecited around the CHF 1.2215 level. Theeuro and British pound gained marginal ground vis-? -vis the Swiss franc asthe crosses tested bids around the CHF 1.6425 and CHF 2.4175 levels,respectively.

AUD

The Australiandollar gained marginal ground vis-? -vis the U.S. dollar today as the Aussie tested offersaround the US$ 0.8360 level and was supported around the $0.8310 level.  The pair has not been this strong sinceFebruary 1989 and Aussie bulls were encouraged by a relatively benign G7communiqu?© that did little to dissuade traders from buying the Australiandollar in carry trades.  Australiandollar bids are cited around the US$ 0.8195 level.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar today asthe greenback tested bids around the C$ 1.1305 level and was capped around theC$ 1.1370 level.  The pair has not beenthis weak since 29 November 2006.  Bankof Canada??™s Business Outlook Survey was released today and reported labourmarket conditions remain strong, input price growth is expected to decelerate,consumer price inflation expectations remain between BoC??™s 1% to 3%inflation-control range, production capacity pressures remain at high levels,and all indicators of business activity have improved over the past few months.U.S. dollar bids are cited around the C$ 1.1285 level.