NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro weakenedvis-? -vis the U.S. dollar today asthe single currency tested bids around the US$ 1.3540 level and was cappedaround the $1.3605 level.  Technically,today??™s intraday low was just below the 23.6% retracement of the move from$1.3255 to $1.3635.  The dollar gainedground after U.S. Treasury Secretary Paulson was quote as saying he is a ???bigbeliever in a strong dollar??? late Friday. Also, a media report quoted European Central Bank member Garganas assaying ???tothe extent that the strength of the euro helps contain inflationary pressure,there is less reason to raise interest rates,??? a comment that Garganassubsequently denied.  The common currencytook little notice of the French presidential election over the weekend inwhich Sarkozy and Royal will go into a run-off election on 6 May. Also, Ecofinfinance ministers met over the weekend to discuss the euro and the eurozoneeconomy and were generally sanguine about the common currency??™s level.   Traders await tomorrow??™s German Ifo survey onbusiness confidence.  Data released inthe eurozone today confirmed that the bloc??™s 2006 budget deficit amounted to1.6% of GDP, down from 2.5% in 2005.  In U.S. news,traders await March existing home sales today tomorrow along with Aprilconsumer confidence results.  Euro bidsare cited around the US$ 1.3490/ 1.3445 levels.

JPN/CNY

Theyen depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??119.00figure and was supported around the ??118.20 level.  Technically, today??™s intraday high was justbelow the 23.6% retracement of the move from ??109.00 to ??122.15.  The yen reversed course overnight aftertraders pushed the yen higher following an upgrade by Standard & Poors toJapan??™s long-term sovereign ratings. Data released in Japanovernight saw March supermarket sales fall 1.5% y/y, the fifteenth consecutivemonthly decline.  Carry trades appear tobe alive and well as there is little indication that Bank of Japan will belifting interest rates anytime soon.  Anews report surfaced that Japanmay form a new agency to manage its massive US$ 900 billion+ war chest offoreign reserves.  The Nikkei 225 stockindex gained 0.02% to close at ??17,455.37. Dollar bids are cited around the ??118.05/ 117.40 levels. The euro came off marginally vis-? -visthe yen as the single currency tested bids around the ??160.45 level and wascapped around the ??161.80 level.  The British pound moved highervis-? -vis the yen as sterling tested offers around the ??238.30 level while the Swiss franc moved lower vis-? -visthe yen and tested bids around the ??97.80 level.  TheChinese yuan weakened vis-? -vis the U.S. dollar as the greenback closed atCNY 7.7247 in the over-the-counter market, up from CNY 7.7179.  People??™s Bank of China advisor Fan Gangreiterated the yuan??™s exchange rate will not resolve China??™s external imbalances.

STERLING

The British pound lost ground vis-? -vis the U.S. dollar today as cable tested bids aroundthe US$ 1.9970 level and was capped around the $2.0060 level.  Robust mortgage lending data were released inthe U.K.today. CML and BSA reported gross mortgage lending reached a record performancein March while Halifax reported U.K. houseprices appreciated 2.8% in Q1 2007.  TheM4 money supply was up 12.8% y/y in March while M4 lending expanded ?‚¤12.7billion.  The Ernst & Young ITEM Clubreport was released overnight and indicated the U.K. is ???skating on thin ice??? withexceptionally high debt levels.  Cablebids are cited around the US$ 1.9925 level. The euro came off marginally vis-? -vis the British pound as thesingle currency tested bids around the ?‚¤0.6775 level and was capped around the?‚¤0.6795 level.

SWISS

The Swiss franc came off vis-? -vis the U.S. dollartoday asthe greenback tested offers around the CHF 1.2125 level and was supportedaround the CHF 1.2055 level. Technically, today??™s intraday high was right around the 23.6%retracement of the move from CHF 1.2435 to CHF 1.2025.  Traders await tomorrow??™s UBS Marchconsumption indicator.  Dollar offers arecited around the CHF 1.2155/ 1.2215 levels. The euro and British pound appreciated vis-? -vis the Swiss franc asthe crosses tested offers around the CHF 1.6430 and CHF 2.4240 levels,respectively.

AUD

The Australiandollar depreciated vis-? -vis the U.S. dollar today as the Aussie tested bidsaround the US$ 0.8320 level and was capped around the $0.8375 level.  Stops were hit below the $0.8335 level,representing the 23.6% retracement of the move from $0.8150 to $0.8390.  Data released in Australian today saw thefinal producer price index for commodities remain unchanged in the Marchquarter from the December quarter, below expectations of a +0.6% gain.  Traders sold the Aussie on this news onreduced expectations that Reserve Bank of Australia will raise interest ratesnext month.  Australian dollar bids arecited around the US$ 0.8300/ 0.8270 levels.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1215 level and was capped aroundthe C$ 1.1240 level.  Traders await Bankof Canada??™s interest rate decision tomorrow. U.S. dollar bids are cited around the C$ 1.1150 level.