Fundamental Outlook

The euro moved sharply higher vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4100 figure and was supported around the $1.3850 level. The big story in the markets today was a decision by the U.S. Treasury that allows several U.S. banks to repay funds they borrowed under the Troubled Asset Relief Program that was inaugurated last year. Ten banks will be permitted to repay tens of billions of borrowed funds and try to return to some semblance of normalcy. The Federal Reserve has reportedly for now shelved a plan that would have potentially allowed it to issue its own debt to help absorb some inflationary pressures and drain liquidity. New York Federal Reserve Bank President Dudley recently said the power to issue debt would be “nice to have, but not critical.” Data released in the U.S. today saw April wholesale inventories off 1.4%. In eurozone news , European Central Bank member Noyer said it is premature to determine if the ECB's unconventional monetary policy measures enacted to stabilize the financial markets have been an overall success, but noted they “have contributed to a significant reduction in various credit risk premia.” Data released in Germany today saw April industrial production fall 1.9% m/m, worse-than-expected. These data suggest the eurozone's largest economy is a laggard as far as the gradual, nascent economic recovery on the Continent is concerned. Euro bids are cited around the US$ 1.3435 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.25 level and was capped around the ¥98.55 level. Bank of Japan reported that paying 0.1% interest on excessive reserves held by financial institutions may distort the proper functioning of the market. The central bank's overnight call rate currently stands at 0.10% and the central bank wants to make sure banks are incentivized to not horde liquidity. Data released in Japan overnight saw the April leading index improve dramatically to 55.0 from 25.0 in March while the composite index improved to 76.5 from 75.5 in March. The Nikkei 225 stock index lost 0.80% to close at ¥9,786.82. 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 ¥137.35 level and was supported around the ¥135.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥159.15 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.45 level. In Chinese news , the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8344 in the over-the-counter market, down from CNY 6.8363.