Friday April 14, 2006 - 13:41:13 GMT
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Forex and Commodity Market Commentary and Analysis (14 April 2006)
The euro was mostly unchanged vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2100 figure and was capped around the $1.2115 level, an extremely tight range reflective of the lack of liquidity during the Easter holiday period. Federal Reserve Governor Kohn made some headlines last night when he said is ‚Äúfocused on making sure that inflation and inflation expectations remain well anchored.‚ÄĚ Kohn added capacity utilization and unemployment data are now at percentages that ‚Äúon occasion in the past have been associated with the beginnings of upward pressure on inflation.‚ÄĚ The common currency is about flat on the week and was confined to a fairly unusual 100 pip range. President Bush‚Äôs meeting with President Hu Jintao in Washington, D.C. next week spotlights a busy week in the FX markets along with the G7 meeting of finance ministers in Washington, D.C. Euro offers are cited around the US$ 1.2225 level.
The yen weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.70 level and was supported around the ¬•118.40 level. Ranges were tight on account of the Easter holiday but the pair is set to notch its fourth consecutive weekly increase. Minutes from Bank of Japan‚Äôs 8-9 March Policy Board meeting were released overnight in which policymakers discussed ‚Äúgradual‚ÄĚ rate hikes that will follow a period of rates near zero per cent. They added ‚Äúaccommodative‚ÄĚ monetary conditions will be maintained for some time and were careful to label the new monetary policy framework ‚Äúan understanding‚ÄĚ and not a target. The Policy Board is trying to steer consumer price inflation between 0% - 2% in two to three years‚Äô time. Data released in Japan overnight saw March department store sales climb 1.4% y/y and March corporate failures and bankruptcies increased. As expected, the government did not change its assessment of the economy in its April monthly report, reiterating the economy is improving as exports rise. Finance minister Tanigaki said G7 finance ministers will discuss ‚Äúglobal currency developments and interest rates‚ÄĚ at the G7 meeting in Washington, D.C. on 21 April along with crude oil prices. The Nikkei 225 stock index climbed 0.20% to close at ¬•17,233.82. Dollar bids are cited around the ¬•117.90 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•143.75 level and was supported around the ¬•143.45 level. The British pound and Swiss franc moved lower vis-√†-vis the yen as the crosses tested bids around the ¬•207.55 and ¬•91.25 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback closed at CNY 8.0180 in over-the-counter trade, down from CNY 8.0185, and at CNY 8.0157 in exchange-traded activity. China announced its foreign exchange reserves grew to US$ 875.1 billion at the end of March, up from February‚Äôs level of US$ 853.7 billion. China is now officially the world‚Äôs largest holder of foreign exchange reserves. Data released overnight saw the March M2 money supply measure up 18.8% y/y. It was also reported that Q1 actual foreign direct investment grew 6.4% y/y to US$ 14.25 billion. All eyes are on President Hu Jintao when he meets with President Bush in the U.S. next week.
The British pound came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.7510 level and was capped around the $1.7530 level, a very tight range. A mixed bag of economic data were released in the U.K. this week but sterling is poised to notch a positive week after average earnings data caused many traders to reduce their expectations of additional Bank of England monetary easing. Cable offers are cited around the US$ 1.7635 level. The euro was little-changed vis-√†-vis the British pound as the single currency tested offers around the ¬£0.6915 level and was supported around the ¬£0.6905 level.
The Swiss franc lost marginal ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2990 level and was supported around the CHF 1.2965 level. The pair is poised to register its third consecutive weekly loss. Dollar bids are cited around the CHF 1.2895 level. The euro and British pound moved higher vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.5725 and CHF 2.2755 levels, respectively.
The Australian dollar moved marginally higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7285 level and was supported around the $0.7265 level. The pair is poised to record its third consecutively weekly improvement. Australian dollar offers are cited around the US$ 0.7370 level.
The Canadian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1485 level and was capped around the C$ 1.1515 level. The pair was about flat on the week after shedding some 240 pips last week. U.S. dollar offers are cited around the US$ 1.1555 level.
The New Zealand dollar came off marginally vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6160 level and was capped around the $0.6195 level. The pair is poised to record its strongest weekly gains since early December. New Zealand dollar offers are cited around the US$ 0.6275 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 599.55 level and was supported around the $595.05 level. Tokyo Commodity Exchange gold futures prices remained firm and supported the pair in the Australasian session. Iran yesterday indicated the United Nations is checking to see if Iran has enriched uranium for nuclear purposes, a report Iran continues to stand by. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 12.94 level and was supported around the $12.80 level.
Crude oil finished the week around the US$ 69.45 level as light, sweet NYMEX crude for May delivery finished the week with its third consecutive weekly gain and is now up some US$ 8.00 in about two months. Some traders believe the United Nations may take action against Iran for its nuclear ambitions as early as late April.
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