Monday October 13, 2008 - 19:10:32 GMT
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Forex Market Commentary and Analysis (13 October 2008)
The euro moved higher vis-√†-vis the U.S.
dollar today as the single currency
tested offers around the US$ 1.3680 level and was supported around the $1.3455
level. The U.S.
government on Friday announced that it will take equity ownerships in some U.S. banks to
help stimulate lending to consumers and companies and restore confidence in the
interbank lending market. This is the
first time the U.S.
government has done this since the Great Depression. U.S. Treasury Secretary Paulson scheduled a
meeting for this afternoon in which the heads of major U.S. banks will
convene. The common currency gained
ground on news that European governments plan to inject billions into troubled
banks and guarantee bank borrowing. Germany‚Äôs plan involves a ‚ā¨500 billion package
plan involves a US$ 55 billion fund to assume stakes in French banks. German Economic Minister Glos said German
economic growth will decelerate even more next year. European Central Bank member Liikanen reported
that mere not be any increase in economic growth until ‚Äúlater‚ÄĚ in 2009. ECB member Bini Smaghi said the recent
pullback in the euro is unlikely a long-term trend and added it ‚Äúwill remain a
strong currency, above all if we manage to get out of this financial crisis
quickly. I think $1.55 was an excessively high level which reflected much
higher growth expectations for Europe than for the United States. I think Italian and
European Union exporters are very happy about (the euro's easing)." ECB‚Äôs Welling called for the creation of a
pan-European supervisor. In U.S. news, the Federal Reserve
essentially offered unlimited U.S. dollar funding, noting it would meet all
bids from commercial bids at a fixed interest rate along with the ECB, Bank of
England, and Swiss National Bank. Euro
bids are cited around the US$ 1.3320 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the
greenback tested offers around the ¬•101.25 level and was supported around the
¬•99.55 level. The Japanese government is
considering a plan to guarantee all bank deposits and Bank of Japan indicated
it may participate in global efforts to increase U.S. dollar funding to
strained Japanese money markets.
Traders are paying close attention to reports that Japan‚Äôs Mitsubishi UFJ Financial Group may
purchase 21% of U.S.
investment bank Morgan Stanley. Japanese financial markets were closed for a
market holiday today. The Nikkei 225
stock index closed on Friday at ¬•8,276.43.
U.S. dollar offers are cited around the ¬•104.15 level. The
euro moved higher vis-√†-vis the yen as the single currency tested offers
around the ¬•137.75 level and was supported around the ¬•134.15 level. The British pound and Swiss franc climbed
higher vis-√†-vis the yen as the crosses tested offers around the ¬•175.80
and ¬•89.45 levels, respectively. The Chinese yuan appreciated vis-√†-vis
the U.S. dollar as the greenback closed at CNY 6.8258 in the over-the-counter
market, down from CNY 6.8357. People‚Äôs Bank of China Deputy Governor Yi Gang
reported ‚ÄúAt this critical moment of financial crisis, coordination and
cooperation are extremely important.‚ÄĚ
Data released in China
overnight saw Q3 consumer confidence fall to 93.8 while China‚Äôs trade
surplus was off 2.6% y/y to US$ 180.9 billion.
The British pound appreciated vis-√†-vis the U.S. dollar today as
cable tested offers around the US$ 1.7440 level and was supported around the
$1.6925 level. Cable extended the
late-day gains it realized on Friday following a report that it would inject up
to ‚ā§37 billion in three major U.K.
banks, namely Royal Bank of Scotland,
Lloyds TSB, and HBOS. Bank of England
Monetary Policy Committee member Sentance reported the economy will likely
contract in H2 2008 and added the chances of a severe downturn have increased. Data released in the U.K. today saw
September factory gate inflation decline for a second consecutive month in
September with output prices off 0.3% and the annual rate lower at 8.5%.
Similarly, input prices fell 1.2% m/m and were up 24.5% y/y. Cable bids are cited around the $1.6635
level. The euro moved lower
vis-√†-vis the British pound as the single currency tested bids around the
‚ā§0.7780 level and was capped around the ‚ā§0.7965 level.
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