U.S. Forex Market Commentary

EURO

The euro came off vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4245 level and was capped around the $ 1.4320 level. Today??™sintraday high represents a new lifetime high for the common currency.Traders drove the pair higher on expectations that today??™s G7communiqu?© will not make explicit reference to the euro??™s relativestrength. Countries like France and Italy are known to be critical of the euro??™s recent strength while Germany and the U.S. appear more sanguine. The G7??™s statement may instead refer to disorderly exchange rates and/ or Asian currency fundamentals. ECB??™sWeber said high oil prices are an ???upside risk??? for inflation and a???downside risk??? for economic growth while ECB??™s Parama said the ECBcannot permit expectations of mid-term price rises. ECB chief Trichetcharacterized the global pace of economic growth as ???fantastic.??? G7officials may also comment on the relatively high price of oil as crudeprices approach the psychologically-important US$ 90.00 figure. Data released in the eurozone today saw September PPI was up 0.2% m/m and 1.5% y/y. InU.S. news, yesterday??™s Philadelphia Fed manufacturing index fell to 6.8in October from 10.9 in September but the prices paid and pricesreceived sub-indices moved sharply higher. FedChairman Bernanke stressed central banks need to ???strive forpredictability and transparency??? while Cleveland Fed??™s Pianalto saidthe economy is ???holding up??? outside of housing. Euro bids are citedaround the US$ 1.4160/ 05 levels. Euro bids are cited around the US$ 1.4160 level.

JPN/CNY

The yen appreciated vis-? -vis the U.S. dollar todayas the greenback tested bids around the ??114.85 level and was cappedaround the ??115.70 level. Technically, today??™s intraday low was justabove the 61.8% retracement of the move from ??109.00 to ??124.15. Finance minister Nukaga said ???there certainly will be debates over foreign-exchange developments??? at today??™s G7 meeting. Mosttraders believe the G7 will call for more Chinese economic reform andare curious to see if the yen??™s relative weakness and/ or carry tradesare mentioned in the G7??™s communiqu?©. BoJ boss Fukui sees possible sub-par U.S. growth ???for the time being??? and many traders believe the BoJ will delay its next rate hike for several months. Data released in Japan overnight saw the all-industries index rise 1.0% in August. The Nikkei 225 stock index lost 1.71% to close at ??16,814.37. Dollar bids are cited around the ??113.85 level. The euro depreciated vis-? -vis the yen as the single currency tested bids around the ??163.70 level and was capped around the ??165.25 level. The British pound and Swiss franc moved lower vis-? -vis the yen as the crosses tested bids around the ??234.80 and ??97.95 levels, respectively. The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.5080 in the over-the-counter market, down from CNY 7.5111.

STERLING

The British strengthened vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0525 level and was supported around the $2.0405 level. Technically, today??™s intraday low was right around the 76.4% retracement of the move from $2.0655 to $1.9650. Cablewas higher on preliminary Q3 U.K. GDP data that saw a quarterly growthrate of 0.8%, the fourth consecutive quarter with that growth rate andthe seventh in a row it??™s been above the trend growth rate of 0.6% to0.7%. Cable bids are cited around the US$ 2.0420/ 2.0350 levels. The euro moved lowervis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6960 level and was capped around the ?‚¤0.7000 figure.


SWISS

The Swiss franc depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.1735 level and was supported around the CHF 1.1655 level. Dollar offers are cited around the CHF 1.1750 level. The euro came off vis-? -vis the Swiss franc as the single currency tested bids around the CHF 1.6685 level while the British pound gained ground vis-? -vis the Swiss franc and tested offers around the CHF 2.4015 level.


AUD/NZD

The Australian dollar weakened vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8890 level and was capped around the US$ 0.8995 level. Data released in Australia today saw the Q3 import price index fall 0.8% q/q. Australian dollar bids are cited around the US$ 0.8840 level. The New Zealand dollar came off vis-? -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7430 level and was capped around the $0.7555 level. New Zealand dollar bids are cited around the US$ 0.7420 level.


CAD

The Canadian dollar appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the C$ 0.9630 level and was capped around the C$ 0.9755 level. Data released in Canadatoday saw the September consumer price index accelerate to +2.5% y/yfrom +1.7% y/y, its highest reading since May 2006. Bank of Canada??™sMonetary Policy Report was released yesterday and predicted economicgrowth will decelerate this quarter with headline consumer pricespeaking around 3%. U.S. dollar offers are cited around the C$ 0.9810/60 levels.