NEWS / Foreign Exchange

U.S. Forex Market Commentary

EURO

The euro moved lower vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4410 level and was capped around the $1.4485 level.  Thecommon currency established a new lifetime high yesterday after theFederal Open Market Committee reduced the federal funds target rate by25bps to 4.50%.  Even though Kansas City FedPresident Hoenig dissented and the Fed noted upside risks to inflationare ???roughly balanced??? with downside growth risks, the U.S. dollar wasstill given after the rate announcement.  Manytraders will continue to scale back their FOMC rate expectations,especially if upcoming non-farm payrolls data are resilient in the wakeof this summer??™s credit crunch.  The Fed??™s policy neutrality also reflects the fact that U.S.U.S. housing sector.  Data to be released in the U.S. today include September personal income and September personal consumption expenditures.  Mosttraders believe tomorrow??™s October non-farm payrolls data will printabove 100,000 following yesterday??™s strong ADP private jobs data.  Euro bids are cited around the US$ 1.4220 level.

JPN/CNY

The yen depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the ??115.75 level and was supported around the ??115.15 level.  Technically, today??™s intraday low was right around the 50% retracement of the move from ??112.55 to ??117.90.  The dollar pressed higher in response to the FOMC??™s policy statement that was deemed more hawkish than expected.  Data released in Japanovernight saw Japanese investors purchase a net ??461.3 billion offoreign bonds last week while foreign investors were net buyers ofJapanese equities last week. These capital flows data suggest the shortyen carry trade is still alive and well. The Nikkei 225 stock indexgained 0.79% to close at ??16,870.40.  Dollar bids are cited around the ??113.85/ ??112.55 levels.  The euro moved lower vis-? -vis the yen as the single currency tested bids around the ??166.60 level and was capped around the ??167.20 level.  The British pound moved higher vis-? -vis the yen as sterling tested offers around the ??240.65 level while the Swiss franc moved lower vis-? -vis the yen and tested bids around the ??99.30 level.  The Chinese yuan appreciatedsharply vis-? -vis the U.S. dollar as the greenback closed at CNY 7.4543in the over-the-counter market, down from CNY 7.4630 ??“ the pair??™sweakest closing rate since the July 2005 yuan revaluation.  Data released in China saw the CLSA October PMI survey improve to 55.2 while the CFLP October manufacturing PMI survey fell to 53.2

STERLING

The British pound lost marginal ground vis-? -vis the U.S. dollar today as cable tested bids around the US$ 2.0750 level and was capped around the $2.0815 level.  Cable establish a new multi-year high yesterday after the FOMC??™s rate decision was announced.  Sterlingwas underpinned today after BoE Chief Economist Bean spoke andhawkishly indicated inflation remains a concern despite the possibilityof a deceleration in economic growth.  Mosttraders now believe the MPC may be on hold through the end of the yearand continue to scale back expectations of a rate cut next week.    Data released in the U.K. today saw October CIPS manufacturing PMI fall to 52.9, its lowest print since December 2006.  Also, Hometrack reported U.K. house sales are set to decline 16.5% in 2008.  Cable bids are cited around the US$ 2.0420 level.  The euro extended recent lossesvis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6925 level and was capped around the ?‚¤0.6965 level.

SWISS