? The euro depreciated vis-?-vis the U.S. dollar today as the single currency tested bids around the US$1.5410 level and was capped around the $1.5625 level. Technically, today's intraday low was right around the 38.2% retracement of the move from $1.4430 to $1.6020. The markets are talking about verbal intervention from Federal Reserve Chairman Bernanke today in which he reported “We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations.” This is as strong a statement a Federal Reserve Chairman has issued about the U.S. dollar in a very long time and this suggests there may be growing cooperation between U.S. and European counterparts about the need to promote a strong U.S. dollar. Most traders do not believe the Federal Reserve is any closer to actually buying U.S. dollars in the market through actual intervention yet today's statement represents a marked change in tactic. Similarly, U.S. Treasury Secretary Paulson reported the government wants to “ensure that the dollar remains a strong and stable currency.” Bernanke also indicated monetary policy is “well-positioned,” suggesting the Federal Open Market Committee may have ended its rate-easing cycle. The FOMC next meets on 24-25 June. Data released in the U.S. today saw April factory orders up 1.1% with the ex-transportation component up 2.6%. Atlanta Fed President Lockhart warned the economy is “growing slowly, poised for gradual recovery, but with real risks that could subvert the story.” In eurozone news, most traders expect the European Central Bank will keep its main refinancing rate unchanged at 4.00% on Thursday when policymakers convene. ECB President Trichet is expected to remain hawkish in his post-meeting press conference. Trichet today said “Challenging as the present global economy may be, the rules for monetary policymaking are not altered.” EMU-15 data saw Q1 GDP growth upwardly revised to 0.8% q/q from 0.7% q/q and 2.2% y/y. Also, the EMU-15 April producer price index was up 0.8% m/m and 6.1% y/y. Euro bids are cited around the $1.5230 level.
?/ CNY The yen depreciated vis-?-vis the U.S. dollar today as the greenback tested offers around the ?105.55 level and was supported around the ?103.85 level. Bank of Japan Policy Board nominee Ikeo testified “It's appropriate that the BoJ aims to take policy steps flexibly after examining both upside and downside risk.” It is believed that Ikeo may have been nominated to a deputy governorship. There are currently two vacancies on the central bank's Policy Board. Economic and Fiscal Policy minister Ota spoke negatively about the economy today saying “With the tepid growth in wages, the impact from rising gasoline prices and food prices is by no means small on households. As the economic watchers' survey shows, consumer sentiment is worsening. We continue to watch carefully its impact on consumption.” Data released in Japan today saw the May monetary base decline 0.9% y/y. The Nikkei 225 stock index lost 1.60% to close at ?14,209.17. Dollar bids are cited around the ?103.00/ 101.35 levels. Dollar bids are cited around the ?103.00/ 101.35 levels. The euro moved higher vis-?-vis the yen as the single currency tested offers around the ?163.20 level and was supported around the ?161.85 level. The British pound and Swiss franc gained ground vis-?-vis the yen as the crosses tested offers around the ?207.10 and ?101.30 levels, respectively. The Chinese yuan appreciated vis-?-vis the U.S. dollar as the greenback closed at CNY 6.9250 in the over-the-counter market, down from CNY 6.9330 – the pair's lowest close since the yuan revaluation of July 2005. People's Bank of China reiterated it will maintain a tight monetary policy to prevent overly rapid credit growth following the recent earthquake.
₤ The British pound weakened vis-?-vis the U.S. dollar today as cable tested bids around the US$ 1.9605 level and was capped around the $1.9740 level. Technically, today's intraday low was right around the 23.6% retracement of the move from $2.0395 to $1.9360. Data released in the U.K. today saw CIPS construction PMI fall to 43.9 in May, its lowest level since April 1997. Traders are talking about a rift between Bank of England Governor King and Chancellor of the Exchequer Darling. The former is said to favour Charlie Bean as the next Deputy Governor while the latter is said to favour Paul Tucker. Both Bean and Tucker are members of the BoE's Monetary Policy Committee. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro came off vis-?-vis the British pound as the single currency tested bids around the ₤0.7855 level and was capped around the ₤0.7940 level.
CHF The Swiss franc depreciated vis-?-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0490 level and was supported around the CHF 1.0275 level. Data released in Switzerland today saw the May consumer price index up 0.9% m/m and 2.9% y/y. U.S. dollar offers are cited around the CHF 1.0760 level. The euro came off vis-?-vis the Swiss franc as the single currency tested bids around the CHF 1.6055 level while the British pound moved higher vis-?-vis the Swiss franc as sterling tested offers around the CHF 2.0570 level.
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