The euro appreciated vis-a-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4240 level and was supported around the $1.4135 level. Stops were hit above the $1.4220 level, representing the 76.4% retracement of the move from $1.4280 to $1.4015. The common currency rocketed higher despite the release of decent U.S. economic data. First, weekly initial jobless claims fell 12,000 to 308,000 with continuing jobless claims off 15,000 to 2.521 million. Second, the September import price index was up 1.0% m/m and 5.2% y/y. Third, the U.S. trade balance deficit shrank 2.4% to –US$ 57.59 billion from July’s revised US$ 59.00 billion total. Fifth, it was reported that U.S. foreclosure filings nearly doubled y/y in September. In eurozone news, ECB chief Trichet warned against “one-way bets” and excessive volatility in exchange rates while maintaining his hawkish outlook on rates. Eurogroup boss Juncker, in contrast, said the euro’s strength “reflects that of our economy.” The ECB’s monthly bulletin was released today and reported “Both earnings volatility and GDP volatility have tended to increase sharply ahead of economic downturns.” Data released in the eurozone today saw EMU-13 Q2 GDP up 0.3% q/q and 2.5% y/y. German September wholesale price inflation was up 0.9% m/m and 4.0% y/y. German think tank HWWI trimmed its 2007 German GDP forecast to 2.5% from 2.8%. ECB’s Bini Smaghi reported the G7 will solicit more information from banks about their exposure to sub-prime mortgage loans. Euro bids are cited around the US$ 1.4120 level.

The yen depreciated vis-a-vis the U.S. dollar today as the greenback tested offers around the 117.80 level and was supported around the 117.05 level. Technically, today’s intraday high was right around the 50% retracement of the move from 124.15 to 111.60. As expected, BoJ’s Policy Board voted 8-to-1 to keep the overnight call rate unchanged at +0.50% with Mizuno likely voting for a rate hike. BoJ Governor Fukui said “Economic data that have been released since the last policy board meeting, including the Tankan survey, confirms the steady expansion of the Japanese economy.” Fukui added “International financial markets showed some improvement, as evident by rises on the stock market to the pre-crisis level, but they continue to be unstable as a whole.” He cited global market uncertainty and U.S. downside risks as factors leading to the BoJ delaying its next rate hike. Many dealers believe the BoJ will not life rates before the end of the current fiscal year in March 2008. The continuation of low interest rates in Japan will precipitate more short yen carry trades. Many data were released in Japan overnight. First, core private-sector machinery orders fell 7.7% m/m. Second, bank lending was up 0.6% y/y, more-than-expected. Third, the September money supply was up 1.7% y/y, below forecasts. Fourth, the August current account surplus was up 42.1% y/y. The central bank also kept its economic assessment unchanged this month, noting the economy will continue to expand as deflationary pressures abate. The Nikkei 225 stock index gained 1.64% to close at ?17,458.98. Dollar bids are cited around the 116.40/ 115.65 levels. The euro moved higher vis-a-vis the yen as the single currency tested offers around the 167.45 level and was supported around the 165.50 level. The British pound and Swiss franc appreciated vis-a-vis the yen as the crosses tested offers around the 239.85 and 99.85 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.5057 in the over-the-counter market, down from CNY 7.5115. A Chinese think tank is now estimating 2007 CPI growth will be around 4.5% while the government reported consumer confidence was up 0.2% q/q in Q3.

The British pound weakened vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0320 level and was capped around the $2.0425 level. Sterling came off after a weaker-than-expected housing market report suggested the U.K. housing sector may be slowing quickly. RICS reported 14.6% more of its members reported a fall in house prices last month rather than a rise – the first decline int two years. Also, a BCC manufacturing sector survey revealed activity remains fairly healthy. Cable bids are cited around the US$ 2.0270 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the 0.6995 level and was supported around the 0.6920 level.