Forex Trading Commentary: G7 Officials To Meet This Weekend In Washington

Euro

The euro fell sharply vis-à-vis the U.S. dollar today (Friday) as the single currency tested bids around the US$ 1.3465 level and was capped around the $1.3650 level. NYMEX crude oil futures for November delivery were off more than 7% and this led to a pullback in the euro. Also, U.S. interbank lending rates remain significantly elevated and they are also keeping the U.S. dollar bid. Data released in the U.S. today saw the August trade gap fall 3.5% to US$ 59.1 billion and September import prices were off 3.0%, the largest decline in five years.

Group of Seven officials are convening in Washington, D.C. this weekend and traders should expect some strong language in their communiqué that can roil the markets at the Monday open. Eurogroup chairman Juncker declined comment on a suggestion the G7 should guarantee interbank lending. There are reports the Fed and Treasury will meet to discuss the terms under which the U.S. government may purchase equity in U.S. banks. Wall Street Journal had a separate report that the U.S. government may temporarily insure all U.S. bank deposits. Euro bids are cited around the US$ 1.3320 level.

Japanese Yen

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.90 level and was capped around the ¥100.45 level. Minutes from a recent Bank of Japan Policy Board meeting indicated slower economic growth is expected. Finance minister Nakagawa ordered the government to identify steps to strengthen Japanese financial institutions. Data released in Japan overnight saw the September M3 money supply up 0.9% y/y while September outstanding bank loans were up 1.6% y/y. Nikkei reported Japan will propose an International Monetary Fund scheme whereby countries’ foreign reserves can be used to finance emergency loans to emerging countries. Japanese markets will be closed on Monday for a national holiday.

The Nikkei 225 stock index lost 9.62% to close at ¥8,276.43. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥132.80 level and was capped around the ¥136.35 level. The British pound moved lower vis-à-vis the yen as the crosses tested bids around the ¥165.90 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥89.65 level.

The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8357 in the over-the-counter market, up from CNY 6.8205. The government reported 2008 GDP growth may slow to 10.1% with CPI up 6.5%. People’s Bank of China called for “flexible macroeconomic policies.”

British Pound

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6790 level and was capped around the $1.7180 level. Prime Minister Brown’s government is receiving some high markets from other countries regarding its decision to offer hundreds of billions in guarantees to encourage banks to start lending to each other and save the banking system. Cable bids are cited around the $1.6635 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7895 level and was capped around the ₤0.8070 level.

Swiss Franc

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1125 level and was capped around the CHF 1.1315 level. Data released in Switzerland today saw September unemployment remain stable at 2.4%. The Swiss finance ministry called for higher guarantees for savers’ deposits. U.S. dollar offers are cited around the CHF 1.1800 figure. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5075 and CHF 1.8855 levels, respectively.

Posted in Categories: Contributor, Economy, Eurozone, External Research, Forex, Japan, Switzerland, UK, USA.

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