The euro depreciated vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4720 level and was capped around the $1.4845 level. The common currency extended its recent pullback on growing doubts the European Central Bank will continue to tighten monetary policy. Traders also added to U.S. dollar exposure after U.S. GDP growth between July and September was upwardly revised to 4.9% from 3.9%, its strongest level in four years. The dollar’s gains were limited, however, that GDP growth in the current October-to-December period could be weak around 1.5% or so. There is also a changing perception in the market concerning interest rate differentials. Some traders are now buying U.S. dollars on the premise lower rates will help bolster U.S. economic growth, rather than unfavourable diminish U.S. interest rate differentials. Remarks from Fed Vice Chairman Kohn were dovish yesterday and the November Beige Book cited decelearing growth, “relatively soft retail spending,” and a “quite depressed” real estate sector. Most traders believe the FOMC will ease monetary policy by 25bps or 50bps on 11 December. Other data released in the U.S. today saw weekly initial jobless claims up 23,000 to 352,000 while continuing jobless claims were up 112,000 to 2.67 million. Additionally, existing home sales were up 1.7% to an annualized 728,000 in October and were off 23.5% y/y while the government’s Q3 home price index fell 0.36%, the first decline in thirteen years. Fed Governor Mishkin speaks later in the U.S. session. In eurozone news, Bundesbank sees 2007 German GDP growth at 2.5% and around 2.0% in 2008 and warned of “abrupt” movements in exchange rates. The German government reported November’s jobless figure fell 53,000. European Central Bank official Liebscher reported upside inflation risks continue to prevail. Euro bids are cited around the US$ 1.4690/ 25 levels.

The yen appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the 109.65 level and was capped around the 110.30 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from 107.20 to 110.45. Data released in Japan today saw October industrial output up 1.6% m/m. Also, the Shoko Chukin Bank’s business sentiment index for small- and medium-size companies fell 0.9 points to 46.9 in November, the second consecutive monthly decline. The Nikkei 225 stock index gained 2.38% to close at 15,513.74. Dollar bids are cited around the 106.55 level. The euro moved lower vis-a-vis the yen as the single currency tested bids around the ?161.60 level and was capped around the ?163.60 level. The British pound and Swiss franc came off vis-a-vis the yen as the crosses tested bids around the 225.75 and 97.95 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.3824 in the over-the-counter market, down from CNY 7.3945. China Investment Corp. announced it may play a “stabilization” role in the U.S. economy following the ongoing subprime mortgage crisis. China’s foreign reserves as of the end of October aggregated US$ 1.455 trillion.

The British pound weakened sharply vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0595 level and was capped around the $2.0830 level. Bank of England Governor King said the U.K. economic outlook in the short-term is “rather uncomfortable and highly uncertain” and these remarks contributed to greater speculation that BoE MPC may move to ease monetary policy as early as December. MPC’s Blanchflower reported the credit crisis has more room to go. Also, Nationwide reported November house prices were off 0.8% m/m while mortgage approvals pulled back to 88,000. In contrast, CBI’s distributive trades survey confirmed H1 November’s sales balance improve to +13 from +10 in October. Cable bids are cited around the US$ 2.0365 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the 0.7165 level and was supported around the ?0.7125 level.

The Swiss franc moved lower vis-a-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1210 level and was supported around the CHF 1.1105 level. Many traders believe Swiss National Bank will tighten monetary policy in December. Dollar offers are cited around the CHF 1.1270 level. The euro moved higher vis-a-vis the Swiss franc as the single currency tested offers around the CHF 1.6505 level while the British pound weakened vis-a-vis the Swiss franc as sterling tested bids around the CHF 2.3010 level.