By GCI Fx Research
€
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2995 level and was supported around the US$ 1.2895 level. Treasury Secretary Geithner defended the Obama adminsitration’s plans to recapitalize the banking system saying “If we simply hoped that banks would work off these assets over time, we would be prolonging the economic crisis, which in turn would cost more to the taxpayer over time.” Geithner added the “vast majority of banks” has more capital than they require to be considered “well-capitalized” but conceded “For every dollar that banks are short of the capital they need, they will be forced to shrink their lending by $8 to $12.” Geithner conceded that even the banks that remain well-capitalized are not lending enough to stimulate the economy. In eurozone news, European Central Bank member Ordonez reported “In general, available forecasts for developed economies point to intense difficulty in 2009” and added an economic recovery may begin “some time in 2010.” Data released in the eurozone today caused the euro to dart higher as the German April ZEW economic expectations index rallied to 13.0 from -3.5 in March. Euro bids are cited around the US$ 1.2765 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.85 level and was supported around the ¥97.70 level. The yen gave back recent gains as traders’ risk aversion diminished and U.S. equities clawed back some of yesterday’s appreciable losses. A government source indicated Japan may reduce its growth forecast for the current fiscal year to -3% from 0%. The government’s Economic Planning Agency reports private forecasts on average estimate the inflation-adjusted gross domestic product rate may have contracted an annualized 12.76% in Q1, a rate that would be worse the 12.1% decline in the October – December period. The Aso government is likely to submit supplementary budget bills to Parliament on 27 April that will finance a stimulus plan with a record ¥15.4 trillion in new spending and tax cuts. The Nikkei 225 stock index shed 2.39% to close at ¥8,711.33. 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 ¥128.05 level and was supported around the ¥126.10 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥145.15 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.70 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8224 in the over-the-counter market, down from CNY 6.8301.
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The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.4705 level and was supported around the $1.4465 level. The U.K. Budget statement will be delivered by Chancellor Darling tomorrow and annual net borrowing may soar to ₤175 billion in the 2009-2010 financial year on account of the recession. Data released in the U.K. today saw March retail price inflation decline 0.4% y/y, the first annual drop since 1960. March consumer price inflation rose 0.2% m/m and 2.9% y/y. Cable bids are cited around the US$ 1.4350 level. The euro weakened vis-à-vis the British pound as the single currency tested bids around the ₤0.8815 level and was capped around the ₤0.8915 level.
Daily Market Commentary provided by GCI Financial Ltd.
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