• The dollar fell modestly against most key currencies on Monday. A slightly better-than-expected ISM
    manufacturing data did little to support the greenback. Investors were reluctant to take big bets before
    Canadian, Australian, European and British interest-rate decisions this week and a closely-watched US
    employment report which would help determine the extent of Fed monetary policy-easing next week. The Fed
    is expected to lower rates 25 basis points while the other central banks are expected to hold rates steady.
  • The yen gained against all major currencies on concerns the global credit-market crunch may deepen.
    Interbank borrowing rates are rising and Moody's Investors Service said it is preparing the big credit-rating
    cuts. Risk aversion pressured the USD/JPY.


Financial and Economic News and Comments

US & Canada

  • The Institute for Supply Management's manufacturing index slipped slightly less than expected to 50.8

    November from 50.9 in October. The decline reflected decreases in employment and inventories. The
    inventory index fell to 46.9 from 47.2 while the employment measure fell to 47.8 in November, the lowest
    since September 2003, from 52 in October. The exports, production and orders components gained. Export
    orders rose to 58.5, new orders index increased slightly to 52.6, and the production index rose to 51.9.


  • The Treasury Department is aggressively pursuing a comprehensive plan to aid as many homeowners as
    possible, Treasury Secretary Henry Paulson said. We are leading the industry to develop a systemic means
    of efficiently moving able borrowers into sustainable mortgages, Paulson said. As volume increases, we will
    need an aggressive, systematic approach to fast-track able borrowers into a refinance or mortgage
    modification, he said. This third element does not, and will not, include spending taxpayer money on funding
    or subsidies for industry participants or homeowners.

  • Eric Rosengren, Boston Federal Reserve President said the US economic expansion will be well below its
    long-term pace for two quarters, potentially spurring increases in home foreclosures.


  • The Chartered Institute of Purchasing and Supply said its UK PMI manufacturing index unexpectedly
    rebounded to 54.4 in November from 52.8 in October. Prices rose to 57.5, close to the highest since
    November 1999, weakening the case for a Bank of England interest-rate cut this week.
  • European Central Bank member Jose Manuel Gonzalez-Paramo said a lack of confidence persists in money
    markets despite the ECB's efforts to restore stability. Its liquidity injections have helped stabilize the very
    short-term money markets, but tension remains in the longer term.

  • The London interbank offered rate that banks charge each other for such loans due after the end of the year
    jumped 63 basis points to 6.72%, the highest since December 1998, the British Bankers' Association said.


  • Australia's trade deficit unexpectedly widened in October to A$2.98 billion ($2.6 billion) from a

    revised A$1.92
    billion in September, the Bureau of Statistics said. Exports dropped 3% and imports rose 2%.

  • Australian company profits declined gross operating profits dropped 2.1% q/q in the third quarter, the

    of Statistics said.

  • Bank of Japan Governor Toshihiko Fukui said: Interest-rate levels will keep rising as long as Japan's
    economic growth is on a sustainable path and prices are stable. Fukui also said: We need to see how the
    U.S. consumer is affected by the housing slump. Besides the housing sector, other parts of the economy
    have proven themselves to be resilient, so the issue is whether this will continue.

FX Strategy Update