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The euro depreciated vis-?-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5840 level and was capped around the $1.5970 level. The common currency gapped higher at the Australasian open to reach its highest level since 23 April but quickly came off after the U.S. government announced measures to support troubled U.S. mortgage giants Fannie Mae and Freddie Mac. For years, these government supported enterprises have been supported by an implicit government guarantee but yesterday's announcement from Treasury Secretary Paulson makes its clear the government will explicitly support the two companies. Paulson said the government is providing the GSEs with a "liquidity backstop" and will have "temporary authority for Treasury to purchase equity in either of the two GSEs if needed." These measures amount to a significant shift in policy and evidence the government's concerns that a failure of these housing giants would reverberate throughout the still-troubled global credit markets. Federal Reserve Chairman Bernanke testifies before the Senate tomorrow and the House on Wednesday. He is expected to signal that interest rates will likely remain unchanged for the next few months. In eurozone news, traders will pay close attention to Wednesday's EMU-15 inflation data. Data released today saw EMU-15 April industrial production fall 1.9% m/m and 0.6% y/y. Euro bids are cited around the $1.5645/ $1.5230 levels.

?/ CNY
The yen depreciated vis-?-vis the U.S. dollar today as the greenback tested offers around the ?106.80 level and was supported around the ?106.00 figure. The pair retraced some of Friday's losses as traders reacted to news the U.S. government will support beleaguered mortgage giants Fannie Mae and Freddie Mac. Bank of Japan's Policy Board began its two-day rate-setting meeting today and policymakers are expected to keep the overnight call rate unchanged at 0.50%. Economy minister Ota reported the economy "is in a flat trend that is barely holding." As expected, the government kept its assessment of the economy unchanged in July, noting "business conditions have deteriorated" and "caution has further increased." The Nikkei 225 stock index lost 0.23% to close at ?13,010.16. Dollar bids are cited around the ?104.95/ ?103.65 levels. The euro moved lower vis-?-vis the yen as the single currency tested bids around the ?168.80 level and was capped around the ?169.65 level. The British pound and Swiss franc moved higher vis-?-vis the yen as the crosses tested offers around the ?212.25 and ?104.70 levels, respectively. The Chinese yuan depreciated vis-?-vis the U.S. dollar as the greenback closed at CNY 6.8450 in the over-the-counter market, up from CNY 6.8340. China's foreign reserves reached US$ 1.8088 trillion at the end of June. Data released in China overnight saw the M2 money supply up 17.37% at the end of June.

₤
The British pound appreciated vis-?-vis the U.S. dollar today as cable tested offers around the US$ 1.9925 level and was supported around the $1.9810 level. Bank of England Governor King reported he expects consumer price inflation will return to 2.0% within two years' time but added CPI could remain above 3.0% well into 2009. BoE Monetary Policy Committee member Barker said rate-setters should not leave rates too high too long. Data released in the U.K. today saw May input prices rise 2.1% m/m and 30.0% y/y, the highest annual rate since 1986. Headline output prices were up 0.9% m/m and 10.0% y/y with core output prices up 0.3$ m/m and 6.3% y/y. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved lower vis-?-vis the British pound as the single currency tested bids around the ₤0.7970 level and was capped around the ₤0.8020 level.

CHF
The Swiss franc depreciated vis-?-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0250 level and was supported around the CHF 1.0130 level. Technically, today's intraday high and low were right around the 38.2% and 50.0% retracements of the move from CHF 0.9645 to CHF 1.0625 levels, respectively. U.S. dollar offers are cited around the CHF 1.0395 level. The euro and British pound moved higher vis-?-vis the Swiss franc as the crosses tested offers around the CHF 1.6240 and CHF 2.0360 levels, respectively.