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EUR/CHF

Swiss Currency Declines To Multi-Week Low Against Euro [EUR/CHF]
Monday, April 07, 2008 4:05:11 AM – In early trading on Monday, the Swiss currency dropped to a 38-day low against the Euro despite a fall in which country`s unemployment rate. The franc also showed weakness against its US and UK counterparts and reached 4-day and 3-day lows, respectively.

The State Secretariat for Economic Affairs, or SECO, reported today that Switzerland`s jobless rate dropped to 2.6% in March from 2.7% registered in February. The unemployment rate came in line with analysts` expectations. The number of unemployed people decreased 12% or 14,138 year-on-year to 103,777 in March.

The Swiss franc lost ground against the euro in early deals on Monday. The franc, which closed Friday`s trading at 1.5830 against the euro, fell to a 38-day low of 1.5906 by about 3:25 am ET. The next downside target level for the franc is seen around 1.622 against the euro.

The franc reversed its direction against the euro after hitting a new multi-year high of 1.5322 on March 17. Since then, the franc has lost around 4%.

Both the Euro-zone and Switzerland`s annual inflation soared in March due to higher energy prices, according to reports released last week.

Euro-zone annual inflation accelerated to a new record high of 3.5% in March, up from 3.3% in February. Economists were looking for a preliminary estimate of 3.3% for March.

Swiss annual inflation increased to 2.6% in March from 2.4% in February, while analysts had expected an inflation rate of 2.5%. A year ago, annual inflation stood at 0.2%. The CPI for March rose 0.3% month-on-month, faster than the expected increase of 0.2% and 0.1% registered in February.

Euro-zone annual inflation continues to stay above the European Central Bank`s target, which is to keep inflation rates “below, but close to, 2% over the medium term”. An accelerating inflation rate is preventing the central bank from lowering borrowing costs in the 15-nation economy. But slowing growth has prompted calls from some politicians and businessmen for the ECB to cut rates soon.

Meanwhile, the Swiss National Bank Governing Board Member Thomas Jordan said in a speech in Bern that there is still uncertainty about the volume of additional bank writedowns that will be needed. Further, he said the situation on the international money market remains tense. According to Jordan, the banks themselves must make a substantial contribution to solving the problems that triggered the ongoing crisis.

Further, Jordan stated that the Swiss National Bank was able to stabilise the three-month Libor within the target range. In addition, it maintained fluctuations in the relative restrictiveness of monetary policy low by comparison with other countries.

Against the dollar, the franc slipped to a 4-day low of 1.0175 in today`s early deals. If the franc drops further, it may test support around the 1.022 level.

Disappointing US jobs data pushed the dollar to a 3-day low of 1.0018 against the franc on Friday morning. But the US currency recovered in afternoon trading and closed the day`s deals at 1.0062.

Employment fell by more than expected in the month of March, according to a report released by the Department of Labor on Friday, with a steep drop in employment in the goods-producing sector contributing to the decline. The report showed that non-farm payroll employment fell by 80,000 jobs in March following a revised decrease of 76,000 jobs in February. The drop in jobs marked the biggest decrease since March of 2003. Economists had been expecting a decrease of 50,000 jobs compared to the drop of 63,000 originally reported for the previous month.

The report also showed that the unemployment rate jumped to 5.1 percent in March from 4.8 percent in February. The increase exceeded the estimates of economists, who had expected to the unemployment rate to edge up to 5.0 percent.

The Swiss franc also weakened against the pound in early deals on Monday. The franc touched a 3-day low of 2.0189 per pound at 3:20 am ET, compared to 2.0054 hit late Friday in New York. The immediate support for the Swiss currency is seen around the 2.023 level.

OECD Maintains Japan`s GDP Growth Forecast; Rate Hike Unwarranted Until Inflation Turns Positive

Monday, April 07, 2008 6:46:38 AM – Monday, The Organization For Economic Co-operation and Development maintained its Japanese growth outlook for 2008 and stated that a hike in key interest rate would not be warranted until inflation is firmly positive.A report from the Organization For Economic Co-operation and Development, or OECD, revealed that the Japanese economy is expected to expand 1.6% in this year, in line with December forecast. The organization said the economy would continue to register 1.5%-2% growth over the next two years.

The expansion has been largely due to buoyant business investment and robust export growth, especially to other Asian nations. Manufacturing sector benefited from strong export growth, but the non-manufacturing sector that is dependent on domestic market lagged behind in terms of profitability, confidence and wage growth.

The Japanese economy faces challenges to sustained growth, notably from persistent deflation, rising public debt and widening difference in various segments of the economy. Further, uncertainties in the global economy along with uneven growth pattern in Japan pose risks to continued growth.

OECD said that the Bank of Japan, or BoJ, appropriately held the key interest rate since early 2007. The report stated, “Further hikes would not be warranted until inflation is firmly positive and the risk of renewed deflation is negligible.”

The BoJ`s outlook of 0.4% rise in consumer prices in the financial year 2008 is not sufficient to justify interest rate hikes for the time being, the report added. OECD expects consumer prices, excluding food and energy to fall 0.1% in 2008, but rise 0.3% in 2009.

The fiscal deficit fell to nearly 4% of GDP in 2007 from 8.2% in 2002. On a primary budget basis, the deficit eased at an annual pace of about 0.5% of GDP between 2002 and 2007.

However, government debt continued to grow, reaching around 180% of GDP in 2007 despite a fall in the budget deficit. This is the record high in the OECD area. As Japan is vulnerable to long term interest rate rise from its low level of nearly 1.5%, further progress in fiscal consolidation is urgent. To reduce the government debt ratio in the 2010s, it is crucial to attain primary surplus target of central and local governments.

 

EUR/JPY

Euro Soars To Multi-week Highs Against Yen And Franc [EUR/JPY]
4/7/2008 7:16:14 AM Monday morning, the European currency advanced to multi-week highs against the yen and the franc as rally in stock prices prompted investors to buy higher-yielding currencies funded with loans from Japan and Switzerland where the interest rates are low.

The euro also strengthened to a 4-day high against the pound, but the single currency dipped to a 4-day low against the dollar.

The euro-dollar pair reached a 4-day low of 1.5629 at about 3:20 am ET, compared to 1.5735 hit late Friday in New York. Currently, the pair is trading at 1.5703.

The dollar is trading higher today, regaining some ground after Friday`s fall following the release of disappointing jobs data.

On Friday, the U.S. Labor Department reported 80,000 jobs were lost in March, the biggest loss in five years and far worse than an expected 50,000 fall in jobs.

Federal Reserve Chairman Ben Bernanke on Wednesday conceded that the US economy might slip into a recession. Bernanke said that the interest rate cuts as well as the emergency measures “appear to have helped stabilize the situation” in financial markets “somewhat.” but he said that these markets are still under “considerable stress.”

The chairman defended the Fed`s role in providing emergency funding to prevent an abrupt bankruptcy at Bear Stearns which “could have been severe and extremely difficult to contain” with fallout for the real economy as well as the financial system.

The Federal Reserve will release the minutes of its March 18 meeting tomorrow. At its March meeting, the Fed decided to lower its key interest rates by 75 basis points, less than the 1 to 1.25-percentage point reduction that was expected by the market.

The euro strengthened to a 38-day high of 1.5933 against the franc at about 5:55 am ET Monday despite a release of better unemployment data from the Swiss economy. The euro-franc pair was worth 1.5830 at Friday`s North American close. Immediate resistance for the euro is seen around 1.622 level.

The State Secretariat for Economic Affairs, or SECO, reported today that Switzerland`s jobless rate dropped to 2.6% in March from 2.7% registered in February. The unemployment rate came in line with analysts` expectations. The number of unemployed people decreased 12% or 14,138 year-on-year to 103,777 in March.

Apart from the euro, the franc dipped to new multi-day lows against the dollar and the pound.

Against the yen, the European single currency advanced to a 40-day high during today`s deals. At about 6:05 am ET, the euro-yen pair reached 161.35, compared to Friday`s closing value of 159.78. If the euro strengthens further, it may test resistance around the 162.9 level.

The euro started strengthening against the yen after hitting a new multi-month low of 151.74 on March 20. Since then, the euro has appreciated 3.86%.

The Bank of Japan will start its two-day meeting tomorrow to decide on interest rates, while the European Central Bank will have its monetary policy meeting on Thursday. The two central banks are widely expected to keep their rates steady but the market is keen to hear what they will say after their respective meetings.

The euro that closed Friday`s New York session deals at 0.7898 against the sterling climbed to a 4-day high of 0.7915 at about 6:05 am ET today. On the upside, 0.7962 is seen as the next target level for the pair.

The Bank of England is also expected to announce the monetary policy decision on Thursday. The BOE is widely expected to reduce the key interest rate by a quarter basis points to 5%.

The Euro zone annual inflation accelerated to a new record high in March, according to the latest flash estimate released by Eurostat last week. The inflation rate rose from 3.3 percent in February to 3.5 percent in March, way above the ECB target rate of 2.0 percent. The Annual M3 money supply growth slipped to 11.3 percent in February from 11.5 percent a year earlier.

EUR/USD

Dollar Stable Versus Other Majors Monday Morning [EUR/USD]
4/7/2008 6:57:23 AM The dollar was steady versus other major currencies Monday morning in New York ahead of this week`s G7 meeting Washington, with analysts saying that any move to reassure people about the US financial system will boost the greenback.

Monday will likely be a quiet day in economic news, with the only report coming in late afternoon trading. AT 3:00 pm ET, a report on Consumer Credit in February will be made public. In January, the report came in at $6.9 billion, and and analysts are expecting a slightly smaller debt in February of $6 billion.

The dollar was little changed versus the euro Monday morning in New York, rising to 1.5626 before easing back to 1.57 just before 7 am ET. Later this week, the European Central Bank will make its next interest rate decision. Expectation are for the ECB to stand pat at 4 percent on Thursday.

German industrial production grew 0.4% month-on-month in February, following a revised growth of 1.4% in January, the Ministry of Economy and Technology indicated Monday. The initial growth estimate for January was 1.8%. Economists had expected industrial output to decline 0.4%.

The dollar advanced against the sterling Monday morning, rising to 1.9833 before levelling off. The dollar slipped below 2 buck mark on Friday, but has since rebounded amid expectations the Bank of England will lower its key lending rate on Thursday.

The dollar gained on the yen Monday morning, challenging a 4-week high before hitting resistance. The buck rose to 102.84, erasing Friday`s losses. The Organization For Economic Co-operation and Development maintained its Japanese growth outlook for 2008 and stated that a hike in key interest rate would not be warranted until inflation is firmly positive.

A report from the OECD revealed that the Japanese economy is expected to expand 1.6% in this year, in line with December forecast. The organization said the economy would continue to register 1.5%-2% growth over the next two years.

GBP/USD

British Pound Mixed Against Majors [GBP/USD]
4/7/2008 6:29:32 AM In early deals on Monday, the British pound showed mixed trading against its major counterparts. The sterling showed weakness against the dollar and the euro, but was higher versus the franc and the yen.

Against the greenback and the single currency, the pound hit 4-day lows today. Meanwhile, the sterling rose to 3-day highs against the franc and the yen.

This week, the focus of the currency markets will be on interest rates decisions by the Bank of Japan, European Central Bank and the Bank of England.

The ECB is still not expected to cut interest rates this week or any time soon given very high inflation levels. However, the matter is different in UK. Most analysts expect the BOE to cut its main rate by a quarter-percentage point to 5%.

In a review of the UK`s Chancellor Darling`s proposed budget for 2008, the Treasury Select Committee are of the view that budget`s projections for the growth of the British economy is too optimistic in light of uncertainty in global financial markets. Darling has previously lowered growth forecasts from an initial 2.5%-3% to a revised 1.75%-2.25%, which will increase the projected public borrowing to rise to £43 billion, up from the £36 billion necessary under the previous economic growth forecast.

The sterling showed weakness against the US currency in early deals today. The pound- dollar pair reached 1.9838 at about 3.20 am Eastern Time, moving down from Friday`s North American close of 1.9931. Currently, the pair is trading near1.9893.

Against the European currency, the British pound trended down today. The pound hit a 4-day low of 0.7913 at about 5.35 am Eastern Time, compared to last week`s close of 0.7898.

The French trade deficit stood at EUR2.8 billion in February, lower than EUR3.7 billion deficit expected, government data showed Monday. In January, trade deficit was EUR3.183 billion, revised from a 3.391 billion deficit initially reported.

Additionally, the Euro-zone Sentix investor confidence rose to 4.15 in April from 0.4 in March.

Meanwhile, German industrial production grew 0.4% month-on-month in February, following a revised growth of 1.4% in January, the Ministry of Economy and Technology indicated Monday. The initial growth estimate for January was 1.8%. Economists had expected industrial output to decline 0.4%.

Against the Swiss franc, the British currency advanced to a 3-day high of 2.0196 at about 4.45 am Eastern Time, compared to 2.0054 hit late New York Friday. The pound-franc pair is now worth 2.0139.

The State Secretariat for Economic Affairs, or SECO, reported today that Switzerland`s jobless rate dropped to 2.6% in March from 2.7% registered in February. The unemployment rate came in line with analysts` expectations. The number of unemployed people decreased 12% or 14,138 year-on-year to 103,777 in March.

The sterling that closed Friday`s deals at 202.40 against the Japanese unit hit a high of 204.28 at about 4.45 am Eastern Time. This sets a 3-day high for the sterling. Currently, the pound-yen pair is trading near 204.11.

The Japanese leading index increased sharply to 50 in February from 36.4 in January, a preliminary report from the Cabinet Office showed Monday.

The coincident index rose to 44.4 from 20 in the prior month and the lagging index remained unchanged at 50.

The Ministry of Finance said that the foreign exchange reserves in Japan increased by $7.61 billion in March to $1.016 trillion. The reserves had risen $11.94 billion in February from the previous month to $1.008 trillion, surpassing the $1 trillion plateau for the first time.

USD/JPY

Yen Slips Versus Other Majors [USD/JPY]
Wednesday, April 02, 2008 2:47:04 PM – The Japanese yen saw weakness against the other major currencies on Wednesday in New York. Traders considered data showing the monetary base in Japan was virtually unchanged in the month of March, the Bank of Japan said today, standing at 88.38 trillion yen.

The currency fell to its lowest level in a little more than a month on Wednesday. The yen dropped to 160.40 by the mid-afternoon against its European counterpart, continuing a slump that began on Tuesday. Euro zone producer prices rose 0.6% month-on-month in February, the Eurostat said Wednesday. Producer prices climbed at a faster pace of 0.9% in January.

The yen continued to fall against the U.S. dollar and reached its lowest level in about three weeks. The currency moved at 102.43 in the mid-afternoon, a little off its daily lows. In his prepared remarks to a Congressional committee Wednesday morning, U.S. Fed chief Ben Bernanke said that the nation`s economy could contract slightly in the first half of 2008, but that he expects the economy to return to trend growth by 2009.

The Japanese currency also dropped against the British pound, touching its lowest mark in more than 2 1/2 weeks. The currencies traded at 203.63 in the mid-morning. UK M4 money supply grew 0.2% on a monthly basis in February, revised down from 0.3% initially estimated, a final report from the Bank of England showed Wednesday.

EUR/USD

Dollar Eases To Euro, Extends Gains Versus Yen After Jobs Report [EUR/USD]
4/2/2008 2:29:36 PM The dollar went back on the defensive versus the euro but extended its recent gains versus the yen on Wednesday, with traders reacting to data signalling resilience in the US jobs market.

The jobs data shared center stage with Federal Reserve Chairman Ben Bernanke`s testimony on the US economy to a joint Congressional committee. Bernanke addressed the recent financial turmoil and actions that the Federal Reserve is taking to address these issues. For the first time, Bernanke admitted that GDP may contract slightly in the first half of 2008, citing a weaker near-term economic outlook.

Earlier in the day, Automatic Data Processing released its report on private sector employment in the month of March, showing that the private sector unexpectedly added jobs compared to the previous month.

The report showed that non-farm private employment increased by 8,000 jobs in March following a revised decrease of 18,000 jobs in the previous month.

The dollar rallied to a new 3-week high versus the yen on Wednesday, rising to 102.83 from an early level near 102. The dollar has pulled away from its mid-March 12-year low of 95.70, supported by increased risk appetite.

The buck eased a bit versus the euro, giving back some of yesterday`s big gains. The dollar slipped to 1.5665, down from a weekly high of 1.5532.

Euro zone producer prices rose 0.6% month-on-month in February, the Eurostat said Wednesday. Producer prices climbed at a faster pace of 0.9% in January. The monthly growth in producer prices matched economists` expectations.

The European Central Bank has refrained from lowering interest rates despite concerns about a strong euro, maintaining that inflation control remains its primary focus.

The dollar also softened slightly versus the sterling, falling back more than a penny to 1.9982. Withthe retreat, the dollar moved away from Tuesday`s 2-week high of 1.9728.

UK`s mortgage approvals decreased to GBP3.4 billion in February from GBP4.64 billion in the last year, the Building Societies Association said Wednesday. Net lending by building societies was GBP974 million, compared to GBP1.467 billion in the prior year. Meanwhile, building society gross lending amounted to GBP3.860 billion in February versus GBP4.20 billion in the year ago period.

Global Round-Up For Wednesday — Bernanke Signals Economy May Contract In 1H 2008

4/2/2008 2:06:00 PM Federal Reserve Chairman Ben Bernanke took to Capitol Hill on Wednesday to deliver testimony`s on the US economy to a joint Congressional committee. Market watchers worldwide were seeking insights about the health of the world`s biggest economy and on the Fed`s role in brokering the takeover of Bear Stearns by rival JP Morgan Chase.

Bernanke`s testimony overshadowed the release of the ADP`s employment report, which showed that employers in the private sector surprising added 8,000 jobs – a good indication that Friday`s pivotal government jobs report could show the jobs situation stabilizing.

In prepared remarks, Bernanke addressed the recent financial turmoil and actions that the Federal Reserve is taking to address these issues. For the first time, Bernanke admitted that GDP may “contract” slightly in the first half of 2008, citing a weaker near-term economic outlook.

“It now appears likely that real gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke said.

Aside from policy actions, the Federal Reserve`s role in the Bear Stearns (BSC) sale in mid-March is evidence of their expanding role as a market stabilizer.

“With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence,” the Fed Chairman explained. “Given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe.`

Before the opening bell Wednesday morning, Automatic Data Processing, Inc. (ADP) released its report on private sector employment in the month of March, showing that the private sector unexpectedly added jobs compared to the previous month.

The report showed that non-farm private employment increased by 8,000 jobs in March following a revised decrease of 18,000 jobs in the previous month. Economists had expected a decrease of about 30,000 jobs compared to the decrease of 23,000 jobs originally reported for February.

Not all the news on the economic front was rosy. Orders for manufactured goods fell more than economists had been excepting in February, according to a report released by the Department of Commerce on Wednesday, with orders for both durable and non-durable goods showing notable declines.

The report showed that new orders for manufactured goods fell 1.3 percent in February following a revised 2.3 percent decrease in January. Economists had expected orders to fall 0.7 percent compared to the 2.5 percent decrease originally reported for the previous month.

Rounding out the economic releases from the US, the Energy Information Administration released its report on oil inventories in the week ended March 28, showing that crude oil inventories rose much more than expected while gasoline inventories fell more than expected.

The report showed that crude oil inventories increased by 7.4 million barrels after coming in unchanged in the previous week. Analysts had been expecting a much more modest increase of about 2.3 million barrels.

Overseas, Euro zone producer prices rose 0.6% month-on-month in February, the Eurostat said Wednesday. Producer prices climbed at a faster pace of 0.9% in January. The monthly growth in producer prices matched economists` expectations. The European Central Bank has refrained from lowering interest rates despite concerns about a strong euro, maintaining that inflation control remains its primary focus.

EUR/JPY

Euro Challenging Multi-month High Versus Yen On Increased Risk Appetite [EUR/JPY]
4/2/2008 12:29:44 PM Increased risk appetite drove the euro to a monthly high versus the yen Wednesday morning, and the single currency is now within hailing distance of its highest level in over two months. The euro jumped to 160.56 from an early level near 159. A move above 161.39 would bring the euro to its best since January 14.