NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro depreciated marginally vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4375 level and was capped around the $1.4425 level.  The common currency staged a late-day recovery yesterday and established a new lifetime high.  Thepair gave back some gains today on a slightly changed perceptionregarding tomorrow??™s Federal Open Market Committee interest ratedecision.  The federal funds futures contract isnow pricing in about a 4% chance the Fed will not raise the target rateby 25bps tomorrow, up from a 0% chance over the past few tradingsessions.  The market is also pricing in about a108% chance the fed funds target rate will be 4.25% - or 50bps lowerthan its current level ??“ by the end of the FOMC meeting on 30 January2008.  The Wall Street Journal reported a Fedrate cut tomorrow is ???no sure thing??? and added a 50bps cut does notappear to be a realistic policy decision tomorrow.  Data released in the U.S. today saw October consumer confidence fall to 95.6 from 99.5 in September.  U.S. Treasury Secretary Paulson reiterated the U.S.??™s long-standing strong dollar policy overnight and added the U.S. housing sector correction has not yet reached bottom.  Ineurozone news, ECB member Gonzalez-Paramo hawkishly said ???upside risksto price stability exist??¦important to maintain credibility and keepinflation well anchored.??? Similarly, ECB??™s Wellink added inflationexpectations are ???quite stable??? and said the outlook for consumerprices is ???quite bumpy.???  Data released in the eurozone today saw Germany??™s October jobless tally fall 40,000 to 3.434 million while German September wholesale sales were off 0.3% m/m and 1.7% y/y.  Notably, Sweden??™s Riskbank lifted its key repo rate by 25bps today to 4.00%, citing strong economic growth and rising employment levels.  Euro bids are cited around the US$ 1.4220 level.

JPN/CNY

The yen appreciated marginally vis-? -vis the U.S. dollar today as the greenback tested bids around the ??114.35 level and was capped around the ??114.90 level.  Technically, the pair continues to orbit the 61.8% retracement of the move ??109.00 to ??124.15.  Data released in Japantoday saw September household spending up 3.2% y/y, more-than-forecast,while the September unemployment rate rose to 4.0% from 3.8% in August.   Most traders believe BoJ??™s Policy Board will keep the overnight call rate unchanged at 0.50% this week.  The Nikkei 225 stock index lost 0.28% to close at ??16,651.01.  Dollar bids are cited around the ??113.85/ ??112.55 levels.  The euro gained marginal ground vis-? -vis the yen as the single currency tested offers around the ??165.60 level and was supported around the ??164.40 level.  The British pound and Swiss franc moved higher vis-? -vis the yen as the crosses tested offers around the ??237.35 and ??98.90 levels, respectively.  The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.4716 in the over-the-counter market, down from CNY 7.4745.  Today??™s close represented the pair??™s lowest close since the July 2005 yuan revaluation. 

STERLING

The British pound strengthened vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0680 level and was supported around the $2.0565 level.  Cable reached a new multi-decade high as stops were hit above the $2.0655 level.  Thepair gained ground following comments from Bank of England MonetaryPolicy Committee member Barker, a rate-setter who is seen asmiddle-of-the-road and not necessarily a hawk or a dove.  Barker suggested economic conditions may not have changed sufficiently to justify a reduction in interest rates.  Traders interpreted this as an indication there may not be enough support for a rate cut at the November MPC meeting next week.  Cable bids are cited around the US$ 2.0420 level.  The euro moved lowervis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6965 level and was capped around the ?‚¤0.6995 level.

CHF

The Swiss franc appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.1595 level and was capped around the CHF 1.1670 level.  Thepair reached its lowest level since March 2005 and today??™s intradayhigh was right around the 23.6% retracement of the move from CHF 1.1895to CHF 1.1600.  Data released in Switzerland today saw the September UBS private consumption indicator improve to 1.99 from 1.95 in August.   Dollar offers are cited around the CHF 1.1665 level.  The euro and British pound weakened vis-? -vis the Swiss franc as the crosses tested bids around the CHF 1.6730 and CHF 2.3975 levels, respectively.

AUD/NZD

The Australian dollar weakened marginally vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.9145 level and was capped around the $0.9235 level.  Technically, today??™s intraday low was right around the 23.6% retracement of the move from US$ 0.8750 to $0.9270.  Reserve Bank of Australia is expected to lift interest rates by 25bps on 6 November.    Australian dollar bids are cited around the US$ 0.9075 level. The New Zealand dollar gained marginal groundvis-? -vis the U.S. dollar today as the kiwi tested offers around theUS$ 0.7710 level and was supported around the $0.7645 level. New Zealand dollar bids are cited around the US$ 0.7625 level.

CAD