The euro depreciated significantly vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4530 level and was capped around the $1.4675 level. Stops were hit below the $1.4575 level, representing the 23.6% retracement of the move from $1.4015 to $1.4750. Liquidity is reduced during the North American session on account of the U.S. Veterans Day holiday in some states and market moves may be exaggerated as a result. Germany’s finance ministry today said “The euro exchange rate is the way it is and there are no grounds for concern.” That comment was in reaction to German media reports over the weekend that a government document noted “further rapid euro appreciation” could “disadvantage” Germany’s economy. The EMU-13 November ZEW survey will be released tomorrow as will the European Commission’s latest GDP forecasts. U.S. September pending home sales will be released tomorrow. Euro bids are cited around the US$ 1.4470/ 1.4385 levels.

The yen strengthened vis-a-vis the U.S. dollar today as the greenback tested bids around the 109.10 level and was capped around the ?110.80 level. The pair reached its lowest level since May 2006 as traders unwound short yen carry trade positions on growing risk aversion. Market participants remain concerned with global credit market conditions and inflated asset prices. Data released in Japan overnight saw October consumer confidence fall to a three-year low at 42.8. Also, the October domestic corporate goods price index rose +2.4% y/y, an acceleration from September’s +1.7% pace, while the September current account surplus expanded 40.4% y/y. The Nikkei 225 stock index lost 2.48% to close at 15,197.09. Dollar bids are cited around the 107.00 figure. The euro fell sharply vis-a-vis the yen as the single currency tested bids around the 158.85 level and was capped around the 162.30 level. The British pound and Swiss franc came off acutely vis-a-vis the yen as the crosses tested bids around the 225.35 and 96.85 levels, respectively. The Chinese yuan weakened vis-a-vis the U.S. dollar as the greenback closed at CNY 7.4123, up from CNY 7.4108. Data released in China overnight saw the October trade surplus climb 13.5% y/y to US$ 27.05 billion while October producer price inflation gained 3.2% y/y. Many traders believe PBoC will tighten monetary policy again before the end of the year. Also, a government think tank sees Q4 GDP up 11.2% with CPI at 5.9% and 2007 GDP growth at 11.4%. Traders await a summit later this month between China and the European Union.

The British pound fell sharply vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0610 level and was capped around the $ 2.0870 level. Stops were reached below the $2.0665 level, representing the 38.2% retracement of the move from $1.9870 to $2.1160. Today’s move was an extension of Friday’s sharp sell-off after risk aversion grew. The complexion of traders’ interest rate outlook changed today following the release of a stronger-than-expected producer price index that saw October factory gate pressures rise 3.8% - the highest since a 4.1% increase in December 1995 and a sharp acceleration from 2.8% in September. These data suggest Bank of England’s Monetary Policy Committee may be unable to ease interest rates next month. Also, the government reported September annual house price inflation eased to 10.8% from 11.4% in August. BoE’s quarterly inflation report will be released on Wednesday. Traders also sold sterling today on account of a massive fire in East London, though initial reports are that terrorism was not involved. Cable bids are cited around the US$ 2.0405 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the 0.7055 level and was supported around the 0.7005 level.

The Swiss franc depreciated vis-a-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1285 level and was supported around the CHF 1.1215 level. The pair retraced some of its recent sharp sell-off as risk aversion became prominent on traders’ radar again. The November ZEW survey will be released on Thursday followed by September real retail sales data on Friday. U.S. dollar offers are cited around the CHF 1.1355 level. The euro and British lost ground vis-a-vis the Swiss franc as the crosses tested bids around the CHF 1.6375 and CHF 2.3255 levels, respectively.

The Australian dollar weakened sharply vis-a-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8790 level and was capped around the $0.9085 level. Technically, today’s intraday high was right around the 50% retracement of the move from $0.8750 to $0.9400. Reserve Bank of Australia’s Monetary Policy Report was released and the RBA sees Q4 inflation above-target around 3.25% y/y. Many traders believe the RBA will be forced to raise interest rates again to counter ongoing inflationary pressures. Australian dollar bids are cited around the US$ 0.8740 level. The New Zealand dollar weakened vis-a-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7440 level and was capped around the $0.7620 level. New Zealand dollar bids are cited around the $0.7415/ 0.7265 levels.

The Canadian dollar slumped vis-a-vis the U.S. dollar today as the greenback tested offers around the C$ 0.9600 figure and was supported around the $0.9430 level. Stops were reached above the $0.9480 level, representing the 23.6% retracement of the move from $1.0865 to $0.9055. October leading indicators will be released on Wednesday. U.S. dollar offers are cited around the C$ 0.9745 level.