NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro depreciated vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.4440 level and was supported around the $1.4385 level.  Today??™s intraday high represented a new lifetime high and was right around an upside technical target.  The big event on traders??™ radar this week is Wednesday??™s interest rate decision from the FOMC.  Themarket are fully discounting at 25bps rate cut by Fed policymakerswhile a minority believe the FOMC will move rates lower by 50bps.  TheFOMC??™s policy statement will be closely watched to see if officialsyield any clues about their likely policy course in December. The bigquestion on traders??™ minds is whether last month??™s rate cut was aone-off move or if it will represent the first in a series of monetaryeasings.  Regarding the impact of the creditmarket turmoil on the financial markets, Fed Governor Mishkin on Fridayreported ???functioning has not yet returned to normal.???  U.S. Treasury Secretary today reported ???Ibelieve that a strong dollar is in our nation's interest and also thatcurrency values should be set in a competitive marketplace based uponunderlying economic fundamentals.??? In eurozone news, Eurogrouppresident Juncker this weekend offered some bullish comments about theeuro.  Euro bids are cited around the US$ 1.4220 level.

JPN/CNY

The yen depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??114.80 level and was supported around the ??114.00 figure.  Technically, today??™s intraday high was right around the 61.8% retracement of the move from ??109.00 to ??124.15.  Data released in Japan overnight saw September retail sales rise 0.5% y/y, the second consecutive monthly increase.  Tradersawait Bank of Japan Policy Board??™s interest rate decision this weekwith most not expecting any change in rates before the end of 2007 atthe earliest.  Also, comments from BoJ boss Fukui will be closely scrutinized.  The Nikkei 225 stock index climbed 1.17% to close at ??16,698.08.  Dollar bids are cited around the ??113.85/ ??112.55 levels.  The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??165.45 level and was supported around the ??164.25 level.  The British pound and Swiss franc appreciated vis-? -vis the yen as the crosses tested offers around the ??236.75 and ??98.70 levels, respectively.  The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.4745 in the over-the-counter market, down from CNY 7.4872.  PBOC official Liu Shiyu reported China will ???continue to pursue exchange rate reform.???

STERLING

The British pound strengthened vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0625 level and was supported around the $2.0525 level.  The pair reached its strongest level since 25 July after many economic data were released in the U.K. First, BoE reported consumer lending increased ?‚¤11.2 billion in September, much higher than August??™s ?‚¤9.6 billion level.  Second, September mortgage approvals totaled 102,000, down from 108,000 in August.  Third, September consumer credit reached ?‚¤1.4 billion from ?‚¤1.1 billion in August.  Fourth, M4 money supply growth decelerated in September, up 1.0% m/m and 12.8% y/y.  Notably,net mortgage lending soared to its highest level in seven months inSeptember, reaching ?‚¤9.8 billion from August??™s ?‚¤8.5 billion level.  Fifth, Hometrack reported October house prices fell for the first time in two years, off 0.1%.  Cable reached its strongest level since 25 July and came within 90 pips of a fresh multi-decade high.  Cable bids are cited around the US$ 2.0420 level.  The euro weakenedvis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6985 level and was capped around the ?‚¤0.7020 level.

 
CHF

The Swiss franc depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.1670 level and was supported around the CHF 1.1605 level.  Today??™s intraday low was just above a multi-year low dating back to March 2005.  Dollar offers are cited around the CHF 1.1805 level.  The euro and British pound moved higher vis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.6785 and CHF 2.4020 levels, respectively.

 
AUD/NZD

The Australian dollar appreciated vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.9270 level and was supported around the $0.9185 level.  Data released in Australia today saw the NAB Q4 business conditions index off two index points.  Australian dollar bids are cited around the US$ 0.9145 level.  The New Zealand dollar gained ground vis-? -vis the U.S. dollar as the kiwi tested offers around the US$ 0.7740 level and was supported around the $0.7665 level. New Zealand dollar bids are cited around the US$ 0.7595 level.