By GCI Fx Research
€
The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4000 figure and was supported around the $1.3895 level. European Central Bank President Trichet defended the central bank’s monetary policymaking during the ongoing economic crisis, reporting its toolkit “is up to the challenge.” Trichet conceded, however, that the eurozone’s economy will continue to contract through the end of 2009 with economic growth returning by the middle of 2010. ECB member Bonello said the ECB is “satisfied” with current policy settings, leading to expectations the ECB will not reduce rates further or expand its asset purchase program anytime soon. Bonello added “there are some signs of bottoming out” but said it is “premature to talk of a sustainable recovery.” The ECB recently initiated a policy to purchase €60 billion in covered bonds to help keep market interest rates low and provide liquidity to the financial market. In U.S. news, traders are keeping a close eye on CIT Group, a troubled U.S. financial giant that is seeking access to the U.S. Treasury’s Temporary Liquidity Guarantee Program so that its debt issuance can be subsidized with a FDIC guarantee. Federal Reserve Chairman Bernanke was quoted as saying the U.S. may experience a jobless recovery. Bernanke is expected to testify before Congress next week and may explain how the central bank will begin to unwind its massive monetary stimuli. Data to be released in the U.S. tomorrow include the June producer price index with most forecasts predicting an increase in the monthly reading. Euro bids are cited around the US$ 1.3435 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥93.00 figure and was supported around the ¥91.75 level. Democratic Party of Japan official Nakagawa reported Japan should diversify its foreign reserves and said foreign exchange intervention during periods of volatility is understandable. The DPJ appears well-seated to give the LDP Aso government a serious challenge at the mandatory general election that must be held by mid-September. Data released in Japan today saw June consumer sentiment improve to 37.6 from 35.7 in May while May revised industrial output was up 5.7% m/m to 79.1. Traders await any indication Bank of Japan may extend its emergency quantitative easing measures through the end of September. The Nikkei 225 stock index lost 2.55% to close at ¥9,050.33. 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 ¥130.20 level and was supported around the ¥128.00 figure. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥150.95 level while the Swiss franc moved higher vis-à-vis the yen and tested bids around the ¥85.95 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8318 in the over-the-counter market, up from CNY 6.8317.
Daily Market Commentary provided by GCI Financial Ltd.
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