Expert Analysis of Today's Market

• The dollar rose versus the yen but fell against the euro and most other key currencies on Wednesday. The yen pared yesterday’s rally as equity markets rose on speculation the Federal Reserve will lower the discount rate another notch. The dollar may reverse its gains from its safe-haven status on possibility the Fed will lower rates more than other central banks in the light of the credit debacle.


• After failing to break support at 154 overnight, the EUR/JPY is currently below the 158 resistance. The pair will continue to trade in tandem with the stock market. We expect further volatility. The short-term trend for the EUR/JPY is negative.

Financial and Economic News and Comments

US & Canada

• The Federal Reserve will probably cut its benchmark interest rate to 4% as slowing US economic growth restrains inflation, said influential Wall-Street guru Edward Hyman, chairman of International Strategy and Investment Group.

Europe

• GfK’s German confidence index fell more than expected to 7.6 in September, the first decline in 6 months, from 8.5 in August. German consumers are getting less optimistic on the global credit crunch and lower stocks.


• UK house prices rose only 0.1% in July and were 8.8% higher than a year earlier, Land Registry said.

Asia-Pacific

• Despite recent volatility in the yen exchange rate, securities firms, asset management companies and banks will this week market ¥1.6 trillion ($13.9 billion) of investment trusts, commonly known as “Toshin” in Japan, aiming to lure investors to foreign securities, according to data compiled by Bloomberg News. Foreign yields are attractive being about 5% higher than Japanese, but it is a risky investment as a move in exchange rate can easily wipe out the interest-rate differential.

FX Strategy Update