U.S. Forex Market Commentary Sun, Sep 6 2009,

The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4325 level and was supported around the $1.4190 level. The common currency retraced some of yesterday’s losses as Group of 20 officials convened in London today. The big news in the market today was a mixed bag of U.S. economic data that saw the August unemployment rate increase to 9.7% from the prior reading of 9.4% while non-farm payrolls fell 60,000 to 216,000 from a revised 276,000. Also, average hourly earnings were up 0.3% m/m and 2.6% y/y, both more-than-expected, while August average weekly hours were unchanged at 33.1. While some economics suggest the improvement in non-farm payrolls are consistent with the recent broad improvement in economic data, others point to an unemployment rate that continues to creep higher toward to the psychologically-important 10.0% level. Dallas Fed President Fisher warned “We are likely to see a prolonged period of sluggish economic performance and uncomfortably high unemployment as businesses reallocate capital and labour.” In eurozone news, European Central Bank member Noyer called on the G20 to implement international rules to render bankers’ bonuses more transparent. Some European governments are seeking tougher international regulations to limit the size of bonuses and extend the period over which bonuses are paid. German finance minister Steinbrueck reported it is premature to decide when countries should implement exit strategies to remove economic stimuli from the system. ECB President Trichet said the bank will not necessarily raise interest rates when policymakers begin to withdraw emergency stimulus measures. ECB member Stark said the central bank is “cautiously optimistic” about the economic outlook. Euro bids are cited around the US$ 1.3900 figure.

JPY / CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥93.25 level and was supported around the ¥92.30 level. Likely incoming Prime Minister Hatoyama, whose Democratic Party of Japan swept to power last weekend, spoke against protectionism today – one week after railing against “American-style free-market economics.” Hatoyama will attend the Group of Twenty summit in Pittsburgh this month. Data released in Japan overnight saw Q2 corporate capital spending off 21.7% y/y. Bank of Japan Governor Shirakawa is attending the Group of Twenty meeting in London today and will attend Monday’s Bank for International Settlements meeting in Basel. Notably, three-month U.S. dollar Libor decline to 0.32188 whereas three-month Libor for yen loans declined to 0.38188. The difference of six basis points is the widest since May 1993 and means the U.S. dollar can now be borrowed more cheaply than the yen. The Nikkei 225 stock lost 0.27% to close at ¥10,187.11. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥133.20 level and was supported around the ¥131.75 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥152.70 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥87.90 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8253 in the over-the-counter market, down from CNY 6.8290. There were rumours in the market yesterday that China may suspend equity initial public offerings from September to October. China announced yesterday that it plans to purchase US$ 50 billion in International Monetary Funds bonds. Chinese benchmark money rates rose by the most in one month on speculation that demand for capital will increase ahead of Metallurgical Corp. of China Ltd’s first share issuance next week. It was reported China will purchase approximately US$50 billion of International Monetary Fund bonds using the yuan. Also, China Banking Regulatory Commission warned banks to guard against risks to ensure the flow of credit to the real economy.