Currency Snapshot for Wednesday September 15, 2010

Here are this morning's opening  interbank mid-market rates:

USD/CAD  1.0309                 EUR/CAD    1.3402                     USD/JPY       85.64

GBP/USD  1.5534                 EUR/USD    1.2981                     USD/CHF    1.0032

Commentary:
 

The Yen tumbled from 15-year high against the USD after Japan intervened for the first time since 2004 to curb gains that threaten an export-led recovery. This was the largest downward move in one day for the Yen in 19 months. A report from a Nikkei newspaper put the size of today's BOJ’s intervention in the currency at about 100 billion Yen. The step comes a day after Japanese Prime Minister Naoto Kan won reelection as the head of the ruling party, beating a candidate who had insisted intervention was necessary. Japan’s Chief Cabinet Secretary Yoshito Sengoku  said he believes the Finance Ministry considers 82 Yen per USD to be the line of defense to prevent currency strength from harming the economy. Sengoku also said the government is seeking to gain the understanding of the U.S. and Europe for the intervention. The problem here is that the move in the Yen has nothing to due with Japan and everything to do with  Europe’s sovereign debt crisis and an enemic U.S. economic recovery. And for these reasons I doubt that the ECB or the Fed will support Japan's efforts. In fact, I think that the timing of today's intervention was in anticipation of the possibility of a restart in the Fed QE program as early as next week. Meanwhile in China, the Yuan rose earlier to the highest level since 1993 against the USD on speculation that the central bank will allow faster appreciation as inflation accelerates and foreign pressure mounts. This move was expected before the U.S. House Ways and Means Committee convenes a two-day meeting today to discuss the Asian nation’s currency policy. In the UK, jobless claims unexpected rose last month for the first time since January which underscores the soft patch the economy is currently in. This points to further QE ahead for the Bank of England, which Governor Mervyn King mentioned as a possibility in his speech to the Trades Union Congress convention in Manchester today. In Canada, the CAD back off it's highest point in 5 weeks on renewed concerns on a slow down in the U.S. economy after the Empire Manufacturing Index for September came in worse than expected at 4.1. The September number also marks a slip from the 7.1 that was registered in the prior month. 

Disclaimer: Please note that any currency rates/prices contained in this document are indicative, and subject to change without notice. Prices quoted may vary substantially based upon the size of transaction and market volatility.