EURO
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4710 level and was supported around the $1.4620 level. Technically, today’s intraday low was just below the 76.4% retracement of the move from $1.4520 to $1.4965. Eurozone finance ministers are meeting tonight to discuss recent strong inflation data in the eurozone and the euro’s value vis-à-vis the yuan. Data released in the eurozone today saw the EMU-13 manufacturing PMI survey improve to 52.8 in November from 52.6 in October. Also, the EMU-13 unemployment rate ticked lower to 7.2% from 7.3%. ECB member Gonzalez-Paramo reported there is a lack of confidence in eurozone money markets. The U.S. dollar may be supported for the next couple of weeks as year-end window-dressing of balance sheets take places and U.S. dollar proceeds are repatriated to U.S. parent companies ahead of the end of the year. In U.S. news, the November ISM manufacturing survey fell to 50.8 from 50.9 in November. Boston Fed President Rosengren sees mortgage foreclosures worsening before they improve. Traders are paying close attention to remarks from U.S. Treasury Secretary Paulson today about plans to bolster the U.S. sub-prime mortgage market. Traders are also paying very close attention to a meeting of the six-nation Gulf Cooperation Council today and tomorrow to determine if the petrodollar-rich area will de-peg from the U.S. dollar. Euro bids are cited around the US$ 1.4605 level.
JPN/CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥110.10 level and was capped around the ¥111.00 figure. Technically, today’s intraday low was just above the 61.8% retracement of the move from ¥111.75 to ¥107.20. Bank of Japan Governor Fukui spoke and said “The correction in the housing market is continuing and if it worsens, or if the situation in financial markets worsens, it would hurt the confidence of the household and corporate sectors, trigger the so-called reverse wealth effect and shrink credit, which would lead to a further slowing of the US economy.” Most traders believe this means the central bank will abstain from raising rates for at least a couple more months. An overnight report confirmed that the combined capital investment of non-financial Japanese companies fell 1.2% y/y in Q3 and that pre-tax profits before extraordinary items fell 0.7%, the first decline in 21 quarters. The Nikkei 225 stock index lost 0.33% to close at ¥15,628.97. Dollar bids are cited around the ¥109.25 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥161.40 level and was capped around the ¥162.70 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested bids around the ¥226.50 and ¥97.60 levels, respectively. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.4025 in the over-the-counter market, up from CNY 7.4000. Japan asked China to permit the “fastest possible” appreciation of the yuan. Data released in China overnight saw the CLSA November PMI survey fall to an eight-month low of 52.8 while the CFLP November PMI survey improved to 55.4. PBoC is expected to tighten monetary policy in the near future.
STERLING
The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0530 level and was capped around the $2.0700 figure. Technically, today’s intraday high and low were right around the 38.2% and 50.0% retracement of the move from $1.9870 to $2.1160. Data released in the U.K. today saw the November manufacturing PMI survey improve to 54.4 from 52.8. Some traders believe these data may cause Bank of England’s Monetary Policy Committee to not ease interest rates on Thursday and delay their rate cut to early 2008. Other data released today underscore the problems in the U.K. money markets as the volume of market loans in the banking system fell from £640 billion in August to £249 billion at the end of September. Cable bids are cited around the US$ 2.0365 level. The euro came off vis-à-vis the British pound as the single currency tested bids around the £0.7090 level and was capped around the £0.7135 level.
SWISS
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1250 level and was capped around the CHF 1.1310 level. Data released in Switzerland today saw November PMI improve to 63.4 from 60.7 in December. Credit Suisse reported Swiss inflation should remain below 2% despite Friday’s data that saw CPI up 1.8% y/y in November, the sharpest increase since May 2001. Some traders believe SNB will tighten monetary policy further on 13 December. SNB reported it will continue to supply money markets with “generous liquidity” to reduce liquidity constraints. Dollar offers are cited around the CHF 1.1390 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.6510 level while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 2.3340 level.