By GCI Fx Research
€
The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3515 level and was capped around the US$ 1.3725 level. The common currency came off as traders booked profits following a week of massive U.S. dollar depreciation. Dealers sold the greenback earlier this week on fears that the Fed’s plan to create up to US$ 1.15 trillion in new liquidity will result in inflation and erode the value of the dollar. Also, the Fed’s purchases of U.S. Treasuries and mortgage-backed securities will depress interest rates and make certain fixed-income assets less attactive to investors. Federal Reserve Chairman Bernanke defended the Obama administration’s plan to limit remuneration at certain U.S. financial institutions and said the U.S. “does not have a realistic alternative to preventing such failures (of big banks).” In eurozone news, European Central Bank member Weber said no eurozone country is currently facing payment difficulties. The ECB remains under pressure to initiate quantitative easing measures like other central banks have done. Data released in the eurozone today saw EMU-16 January industrial output off 3.5% m/m and 17.3% y/y. German February PPI was off 0.5% m/m and up 0.9% y/y. Euro bids are cited around the US$ 1.2385 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.25 level and was supported around the ¥94.15 level. Liquidity was muted in Japan overnight on account of the Spring Day holiday. Bank of Japan announced it will likely provide subordinated loans to Japanese companies ahead of the end of the fiscal year at the end of this month. The government is eager to prevent corporate collapses that may originate because of dysfunction in the asset-backed commercial paper market. The Nikkei 225 stock index lost 0.33% to close at ¥7,945.96. U.S. dollar offers are cited around the ¥104.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥130.45 level and was supported around the ¥129.00 figure. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥138.95 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥85.55 level.
Daily Market Commentary provided by GCI Financial Ltd.
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