NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro reversed course and appreciated vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.4280 level and was supported around the $1.4170 level.  Technically, today??™s intraday low was just above the 23.6% retracement of the move from $1.3360 to $1.4395.  The common currency recovered after yesterday??™s sharp moves as global appetite for risk returned to the market.  The recent sharp sell-off in global equity markets was broken today.  Mosttraders believe the U.S. dollar??™s short-term fortunes will be dictatedthe FOMC??™s interest rate decision and statement on 31 August.  Traders are also speculating as to how FOMC policy will materialize in December.  Anindication from the FOMC that it may continue to expand monetary policycould dent confidence in the U.S. dollar as yield differentials withother currencies would erode.  Data released in the U.S. today saw Redbook U.S. retail sales off 0.2% m/m in the first two weeks of October.  ChicagoFed??™s Evans predicted the housing industry will recover in 2008. TheRichmond Fed??™s October manufacturing index worsened to -5 from +14 inSeptember.  In eurozone news, EMU-13 industrialorders were up 0.3% m/m in August, below expectations. ECB??™s Weberagain hawkishly reported ???The inflationaryrisks have increased in the past weeks. If the inflationary pressureendangers price stability in the medium term, there is a need to takeaction in terms of monetary policy.??? Euro bids are cited around the US$1.4045 level.

JPN/CNY

The yen weakened vis-? -vis the U.S. dollar today as the greenback tested offers around the ??115.05 level and was supported around the ??114.15 level.  Technically,the pair continues to orbit the ??114.75 level, representing the 61.8%retracement of the move from ??109.00 to ??124.15.  The yen came off as appetite for global risk returned and risk aversion diminished.  Some of the yen??™s strength over the past couple of sessions has been attributable to the unwinding of short yen carry trades.   Most traders believe the BoJ will not lift the overnight call rate again until 2008 from its current 0.5% level.  The Nikkei 225 stock index climbed 0.07% to close at ??16,450.58.  Dollar bids are cited around the ??113.85/ 112.60 levels.  The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??163.95 level and was supported around the ??162.05 level.  The British pound and Swiss franc gained ground vis-? -vis the yen as the crosses tested offers around the ??235.65 and ??98.10 levels, respectively.  The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.5068 in the over-the-counter market, down from CNY 7.5086.  PBOC reiterated it will continue with yuan reforms and make it convertible on China??™s capital account.  China announced it will delay the release of Q3 economic data until Thursday.  U.S. Treasury chief Paulson called on China to implement a ???fully market-determined currency in the medium-term.???

STERLING

The British pound made sharp gains vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0500 figure and was supported around the $2.0305 level.  Cableretraced most of yesterday??™s loss despite the release of a gloomy CBIOctober manufacturing survey that saw the balance of manufacturers whoare optimistic about the year ahead decline to -13%, the lowest readingsince January 2006.  Bank of England MPC member Barker dovishly reported ???The disruption in financial markets which started on August 9 has changed the balance of risks around UK economic activity towards the downside.???  Most traders believe the MPC is in a wait-and-see mode on interest rates.  Cable bids are cited around the US$ 2.0270 level.  The euro came offvis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6945 level and was capped around the ?‚¤0.6980 level.

SWISS

The Swiss franc appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.1700 figure and was capped around the CHF 1.1785 level.  The pair continues to orbit the CHF 1.1745 level, representing the 23.6% retracement of the move from CHF 1.2215 to CHF 1.1600.  Dollar offers are cited around the CHF 1.1835/ 1.1910 levels.  The euro and British pound gained ground vis-? -vis the U.S. dollar today as the crosses tested offers around the CHF 1.6725 and CHF 2.4045 levels, respectively.

AUD/NZD

The Australian dollar appreciated vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8970 level and was supported around the $0.8855 level.  Australian dollar bids are cited around the US$ 0.8745 level. The New Zealand dollar gained ground vis-? -vis the U.S. dollar as the kiwi tested offers around the US$ 0.7570 level and was supported around the $0.7460 level.

CAD