Thursday August 9, 2007 - 15:35:56 GMT
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Forex and Commodity Market Commentary and Analysis (9 August 2007)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3655 level and was capped around the $1.3815 level. The common currency dove after French banking giant BNP Paribas temporarily suspended three asset-backed securities funds on account of a ‚Äúcomplete evaporation of liquidity‚ÄĚ in certain parts of the market. Similarly, Commerzbank announced a ‚ā¨40 million charge related to a ‚ā¨1.2 billion exposure to the U.S. subprime market sector. These news evidence the fact that some global contagion is already taking place as the doldrums of the U.S. housing market and repricing of risk in the credit markets are being felt elsewhere. The European Central Bank injected about ‚ā¨95 billion in money market liquidity today on account of ‚Äútensions‚ÄĚ and added it is ‚Äúready to act‚ÄĚ to ensure orderly market conditions. This is the first time the ECB injected extra money market liquidity to calm markets since the terror attacks of 11 September 2001. Likewise, the Federal Reserve accepted US$ 24 billion in overnight repo transactions today, more-than-expected and an indication the Fed is trying to calm the markets. In other eurozone news, the ECB reported monetary policy remains ‚Äúon the accommodative side‚ÄĚ and added ‚Äústrong vigilance is therefore of the essence to ensure that risks to price stability over the medium term do not materialize,‚ÄĚ largely consistent with remarks from ECB President Trichet on 2 August. In U.S. news, weekly initial jobless claims were up 7,000 to 316,000 while continuing jobless claims were up 39,000 to 2.559 million. Euro bids are cited around the US$ 1.3625 level.
The yen made strong gains vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•118.20 level and was capped around the ¬•119.75 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from ¬•115.15 to ¬•124.15. Traders unwound short yen carry trades after further fallout from the subprime mortgage market meltdown was felt in the U.S. and Europe. The yen has been used as a funding vehicle for years on account of low interest rates in Japan but expectations that Bank of Japan could lift the overnight call rate by +25bps to +0.75% later this month has the yen on the offensive. Data released in Japan today saw foreign investors as net sellers of Japanese equities for the second consecutive week while foreigners were net buyers of Japanese bonds last week. Also, the value of orders for industrial machinery placed with Japanese companies were off 15.3% y/y. The Nikkei 225 stock index gained 0.83% to close at ¬•17,170.60. Dollar bids are cited around the ¬•117.25 level. The euro moved sharply lower vis-√†-vis the yen as the single currency tested bids around the ¬•161.50 level and was capped around the ¬•165.25 level. The British pound and Swiss franc weakened vis-√†-vis the yen as the crosses tested bids around the ¬•239.00 figure and ¬•98.60 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.5645 in the over-the-counter market, down from CNY 7.5748. President Bush commented on the ongoing row involving comments made by some Chinese officials wherein they suggested China may reduce its holdings of U.S. assets. Bush called such a move would be ‚Äúfoolhardy‚ÄĚ while Treasury Secretary Paulson said such talk is ‚Äúabsurd.‚ÄĚ
The British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 2.0205 level and was capped around the $2.0395 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $1.9620 to $2.0655 level. Data released in the U.K. today saw the June trade balance print at -‚ā§6.3 billion, down from -‚ā§6.4 billion, the lowest deficit since October 2005. Cable bids are cited around the US$ 2.0140 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6745 level and was capped around the ‚ā§0.6780 level.
The Swiss franc was little-changed vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1920 level and was capped around the CHF 1.1995 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from CHF 1.2165 to CHF 1.1815. Data released in Switzerland today saw July consumer sentiment fall to +15 from +20 in April. Dollar offers are cited around the CHF 1.2030 level. The euro and British pound weakened vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6370 and CHF 2.4200 figure, respectively.
The Australian dollar fell sharply vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8485 level and was capped around the $0.8660 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $0.8330 to $0.8870. The Antipodean currencies came off on account of worsening global credit conditions and escalating volatility. Traders unwound short yen carry trades and pared back investments in higher-yielding currencies like the Aussie and kiwi. Data released in Australia today saw the July jobless rate remain steady at 4.3%. Australian dollar bids are cited around the US$ 0.8430 level. The New Zealand dollar depreciated vis-√†-vis the U.S. dollar as the kiwi tested bids around the US$ 0.7525 level and was capped around the $0.7700 figure. New Zealand dollar bids are cited around the US$ 0.7440 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0640 level and was supported around the $ 1.0470 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from C$ 1.0340 to C$ 1.0700 figure. Bank of Canada commented on the ongoing global liquidity glut saying ‚ÄúIn light of current market conditions, the Bank of Canada would like to assure financial market participants and the public that it will provide liquidity to support the stability of the Canadian financial system and the continued functioning of financial markets.‚ÄĚ Data released in Canada today saw June new housing prices close for the eighth consecutive month, up 7.8% y/y. U.S. dollar offers are cited around the C$ 1.0655 level.
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