Tuesday October 9, 2007 - 15:07:31 GMT
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Forex and Commodity Market Commentary and Analysis (9 October 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4060 level and was supported around the US$ 1.4015 level. The common currency did not get much of a boost late yesterday following the meeting of eurozone finance ministers who convened to discuss the euro‚Äôs appreciation. Finance ministers merely indicated with ‚Äúgreat attention‚ÄĚ that the U.S. is still officially promoting a strong dollar policy. European Central Bank President Trichet testified today that there is heightened uncertainty in the financial markets but reiterated there are risks of higher inflation. Most traders believe the ECB will remain in a data-dependent mode over the next few months and keep the refinancing rate unchanged absent any additional turmoil in the financial markets. Trichet also reiterated his call for a ‚Äúcommon position‚ÄĚ and ‚Äúverbal discipline‚ÄĚ on exchange rates.‚ÄĚ ECB member Ordonez today said the ECB agrees ‚Äúthat a strong dollar is in the U.S.‚Äôs best interests‚ÄĚ and called on China to ‚Äúallow some flexibility.‚ÄĚ Data released in the eurozone today saw German August industrial output up 1.7% m/m. In U.S. news, traders await comments from Federal Reserve officials later in the North American session along with the minutes from the 18 September Federal Open Market Committee meeting. Traders are also awaiting any clues as to the likely outcome of the Group of Seven meeting of central bankers and finance ministers in Washington, D.C. on 19 October. Euro bids are cited around the US$ 1.3995 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•117.05 level and was capped around the ¬•117.50 level. Most traders expect Bank of Japan‚Äôs Policy Board will keep its overnight call rate unchanged at +0.50% when the central bank‚Äôs interest rate decision is released on Thursday. Some believe the BoJ will keep rates unchanged through the end of Japan‚Äôs current fiscal year in March 2008. Data released in Japan overnight saw the August value of industrial machinery orders fall 12.3% y/y, down from July‚Äôs +32.2% expansion. Also, the economy watchers‚Äô current conditions index fell to 42.9 in September from 44.1 in August while the forward-looking index printed at 46.0 in September. The Nikkei 225 stock index climbed 0.56% to close at ¬•17,159.90. Dollar bids are cited around the ¬•116.40/ ¬•115.65 levels. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•164.15 level and was capped around the ¬•165.15 level. The British pound and Swiss franc came off vis-√†-vis the yen as the crosses tested bids around the ¬•237.00 and ¬•98.50 levels, respectively. The Chinese yuan depreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.5170 in the over-the-counter market, up from CNY 7.5062. Data released in China today saw the Q3 business climate index up 8.0 index points y/y.
The British pound moved extended recent losses vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 2.0255 level and was capped around the $2.0375 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.9880 to $2.0495. Sterling failed to rally on news that the U.K. government will guarantee a larger portion of deposits in troubled bank Northern Rock Plc. Data released in the U.K. today saw BRC September like-for-like retail sales up 3.0% y/y. NIESR reported that U.K. GDP growth was stable at 0.7% in the three months to September compared with the three months to August. Also, the August U.K. trade in goods balance narrowed to -‚ā§6.9 billion from -‚ā§7.4 billion in July. Finally, CML reported that August mortgage lending remained strong at ‚ā§34 billion compared with ‚ā§34.1 billion in July. Cable bids are cited around the US$ 2.0185 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6930 level and was supported around the ‚ā§0.6895 level.
The Swiss appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1840 level and was capped around the CHF 1.1895 level. Technically, today‚Äôs intraday high was just above the 50% retracement of the move from CHF 1.2150 to CHF 1.1620. UBS released a survey today that suggests Swiss industrial growth was strong in Q3 with a positive outlook for Q4. Dollar offers are cited around the CHF 1.1885/ 1.1945 levels. The euro and British pound moved lower vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6640 and CHF 2.4035 levels, respectively.
The Australian dollar gained ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8975 level and was supported around the US$ 0.8910 level. The Aussis reached a new multi-decade high yesterday before consolidating recent gains but traders lifted the pair higher today after the U.S. dollar came off during the North American session. Data released in Australia today saw the September NAB business confidence index decline to its lowest level since January. Australian dollar bids are cited around the US$ 0.8870 level. The New Zealand dollar gained ground vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.7645 level and was supported around the $0.7585 level. A corporate business survey released today saw New Zealand businesses remain pessimistic about the economy with a net 30% expecting general business conditions to worsen. New Zealand dollar bids are cited around the US$ 0.7545 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 0.9835 level and was capped around the C$ 0.9895 level. Data released in Canada saw new housing starts up 16.6%, above expectations, to an annualized 278,000 new homes. U.S. dollar offers are cited around the C$ 0.9940 level.
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