Expert Analysis of Today's Market

• In NY trading Wednesday, the dollar was lower versus other major currencies except the yen on speculation the Federal Reserve is likely to lower interest rates more than other central banks. The yen fell against the dollar and in cross trades as risk aversion diminished on higher equity prices.


• The USD/JPY is testing resistance at 115.50 as global stocks are recovering. The pair is trading in tandem with the stock markets. We expect further volatility in the yen.

Financial and Economic News and Comments

US & Canada

• The Bank of Canada is likely to hold off on raising interest rates through yearend as US subprime market losses are spreading and squeezing global credit markets.

Europe

• The European Central Bank said it intended to add €40 billion ($54 billion) to the banking system to boost liquidity and steady financial markets. The ECB said it decided to “conduct a supplementary liquidity- providing longer-term refinancing operation.” The funds will be made available to banks for 3 months in a further step to support a normalization of the money market. The ECB indicated it may still raise its key interest rate.


• The Confederation of British Industry’s index of UK factory orders reached the highest in 12 years. Industrial orders rose to 9 in August from -6 in July. The trade was looking for -2, while prices rose to 16 in August from 11 in July.

Asia-Pacific

• Japan’s trade surplus narrowed more than forecast as automobile exports slowed. The surplus fell 21.1% y/y in July to ¥671.2 billion ($5.9 billion), the first decline since January, the Finance Ministry said. Exports increased a less-than-expected 11.7% to ¥7.06 trillion in July as growth rates in shipments to the US, Europe and China slowed. Imports rose 16.9% to a record ¥6.39 trillion, as a weaker yen in July drove energy costs higher.


• The Bank of Japan is expected to keep its benchmark interest rate at 0.5% after its two-day meeting ending tomorrow.

FX Strategy Update