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The euro depreciated vis-à-vis the U.S. dollar today
as the single currency tested bids around the US$ 1.3150 level and was capped around the $1.3360 level. The common currency reached its lowest level since March 2007. The Federal Reserve announced new liquidity provision program today called the Money Market Investor Funding Facility that will purchase certificates of deposit, bank notes, and commercial paper with maturities of 90 days or less. This program is designed to jump-start the asset-backed commercial paper market and increase banks’ abilities to obtain short-term funding. Fed Chairman Bernanke yesterday said he would likely support a second fiscal stimulus plan and reiterated a gloomy forecast for the U.S. economy. Data released in the U.S. today saw the Chicago Fed’s National Activity Index fall to -2.57 from -1.61 in August. In eurozone news, the International Monetary Fund reported the eurozone’s economic growth will decline to 0.2% in 2009 and there is mounting evidence of a global economic recession. European Central Bank member Stark said “more accidents” may occur in the global financial system. ECB member Draghi sees “negative signals for the next few quarters” of the Italian economy. Liquidity demands in the eurozone remain significant. The ECB lent €300 billion in weekly funds in addition to US$ 125 billion in U.S. dollar funds. Euro bids are cited around the US$ 1.3320 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥100.70 level and was capped around the ¥102.15 level. The government is working on a ¥2 trillion income tax cut and a plan to recapitalize banks. Japan has already compiled an economic package with government spending of ¥1.8 trillion to counter the economic downturn. Most economists believe Japan cannot afford a larger tax cut and believe Japan’s largest banks do not have a large amount of exposure to bad credit. Bank of Japan Deputy Governor nominee Yamaguchi said the central bank should continue to “make its own policy judgments based on the economic condition of their countries.” Traders await the release of September trade surplus data and many expect it contracted at least 50% on account of the global economic slowdown. The Nikkei 225 stock index climbed 3.34% to close at ¥9,306.25. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥132.55 level and was capped around the ¥136.40 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥170.90 and ¥87.15 levels, respectively. The Chinese yuan weakened vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8337 in the over-the-counter market, up from CNY 6.8299. NDRC chairman Zhang said he sees economic growth around 9% in 2008. Data released in China overnight saw the September property climate index lower while the September enterprise commodity price index was up 7% y/y.
£
The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6940 level and was capped around the $1.7200 figure. Bank of England allocated US$ 26 billion in an auction of unlimited one-month funds today. Separately, Barclays bank may raise at least £1 billion via a three-year note, a positive development that suggests the U.K. government’s initiatives to restore public traditional bank funding channels is meeting with some success. BRC reported U.K. manufacturers could slash 60,000 jobs by the end of the year and said output could fall at its sharpest rate in nearly 30 years. Cable bids are seen around the $1.7420 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the £0.7735 level and was capped around the £0.7785 level.
CHF
The Swiss franc came off vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1590 level and was supported around the CHF 1.1470 level. Technically, today’s intraday high was just below the 76.4% retracement of the move from CHF 1.3285 to CHF 0.9645. Data released in Switzerland today saw the real September trade surplus stable at CHF 1.44 billion while adjusted exports fell 8.2% m/m. U.S. dollar offers are cited around the CHF 1.1610 level. The euro and British pound depreciated sharply vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5130 and CHF 1.9490 levels, respectively.