GCI Financial

Euro €
The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5690 level and was supported around the $1.5530 level. The common currency established a new lifetime high today as traders reacted to news that JPMorgan Chase and the Federal Reserve Bank of New York are providing 28-day funding to U.S. investment bank Bear Stearns. Bear announced that liquidity evaporated yesterday and traders are sensitive to any additional funding shortfalls by U.S. financial institutions. The fed funds futures markets is currently discounting about a 66% chance the Federal Open Market Committee will reduce the federal funds target rate by a cumulative 125bps over the next two meetings, but many dealers believe interest rate expectations may have gotten ahead of themselves. Data released in the U.S. today saw the University of Michigan consumer sentiment index fall to 70.5 from 70.8 in February. Also, February consumer price inflation data came in on the tame side with the headline and core rates both unchanged m/m and below expectations. A moderation in inflation pressures will provide the Federal Reserve with more scope to ease monetary policy. Headline CPI was up 0.4% y/y and 2.3% y/y. In eurozone news, EMU-15 consumer price inflation was upwardly revised to an all-time high of 3.3% for February and this will keep the European Central Bank on the offensive as far as inflation is concerned. Traders are paying very close attention to a summit of European Union officials and the communiqué they will issue. Officials are expected to verbally intervene against disorderly exchange rate movements and their meeting only increases chances of a concerted global intervention to support the U.S. dollar. Other data released in the eurozone today saw EMU-13 Q4 labour costs up 3.5% y/y while German final February CPI was up 0.5% m/m and 2.8% y/y. Also, EMU-13 Q4 2007 wages were up 2.9% y/y. Euro bids are cited around the US$ 1.5145 level.

Yen ¥/ CNY
The yen extended recent gains vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥99.55 level and was capped around the ¥101.15 level. The pair reached levels not seen since 1995 as heightened risk aversion dampened demand for U.S. assets and led to further unwinding of the short yen carry trade. Finance minister Nukaga and Economy minister Ota verbally intervened today to counter the yen's appreciation. The Fukuda government may put forth a candidate other than Muto to succeed Bank of Japan Governor Fukui when he retires on 19 March. Muto's nomination has essentially been blocked by the Upper House of parliament and a compromise candidate is expected to be named. The Nikkei 225 stock index lost 1.54% to close at ¥12,241.60. Dollar offers are cited around the ¥101.85 level. The euro weakened vis-à-vis the yen as the single currency tested bids around the ¥156.05 level and was capped around the ¥157.60 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥202.85 and ¥99.20 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0894 in the over-the-counter market, down from CNY 7.0900, the pair's lowest close since the yuan revaluation of July 2005. Data released in China today saw January-February urban fixed-asset investment up 24.3% y/y.

GBP ₤
The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 2.0395 level and was supported around the $2.0210 level. The pair reached its highest level since 14 December 2007. Prime Minister Brown said people are "concerned" about excessive volatility in the foreign exchange markets. Cable bids are cited around the US$ 1.9910 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7665 level and was capped around the ₤0.7695 level.

CHF
The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 0.9990 level and was capped around the CHF 1.0140 level. The pair moved below parity as traders moved into francs on account of escalating risk aversion and an unwinding of the short Swiss franc carry trade. Swiss National Bank Hildebrand said financial market turbulence is likely to continue. SNB kept interest rates unchanged yesterday. U.S. dollar offers are cited around the CHF 1.0105 level. The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5670 and CHF 2.0360 levels, respectively.