The euro lost ground vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3615 level and was capped around the $1.3680 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from $1.2865 to $1.3850. The Federal Reserve injected US$ 2.0 billion in temporary reserves through overnight repurchase agreements today. The common currency came off following comments from European Central Bank President Trichet who indicated the central bank could forego a rate hike next month if financial markets become volatile again. Most traders believe the ECB will lift its main refinancing rate by +25bps to 4.25% by the end of the year. Data released in the U.S. today saw August consumer confidence fall to 105.0 while the Richmond Fed manufacturing index improved to +7 from +4 in July. Data released in the U.S. yesterday saw existing home sales deteriorate 0.2% in July with the supply of unsold single-family homes at a 9.2 months, the highest level since 1991. Traders are paying close attention to the release of the Federal Open Market Committee meeting minutes that will be released later in the North American session. Traders are interested in what the Fed discussed on 7 August about the subprime credit market glut. Fed Chairman Bernanke will speak this Friday at the annual Jackson Hole Fed symposium. In eurozone news, the German Ifo August business climate index receded to 105.8 from 106.4 in July, above expectations. Also, the EMU-13 M3 money supply expanded 11.7% y/y, up from 10.9 y/y in June – the highest level of expansion since at least August 1982. These data underscore the need for additional monetary tightening by the ECB. Euro bids are cited around the US$ 1.3530 level.

The yen appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the ?114.55 level and was capped around the ?115.85 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from ?124.15 to ?111.60. Minutes from Bank of Japan Policy Board’s July meeting were released today and many policymakers opted to hold off on raising interest rates until they determined if the central bank’s 2% growth forecast released in April will materialize. Policymakers voted eight-to-one to keep the overnight call rate unchanged at +0.50% and most traders expect the BoJ to lift the call rate by +25bps to +0.75%. The Nikkei 225 stock index lost 0.09% to close at ?16,287.49. Dollar bids are cited around the ?113.75 level. The euro lost ground vis-a-vis the yen as the single currency tested bids around the ?156.05 level and was capped around the ?158.15 level. The British pound and Swiss franc depreciated vis-a-vis the yen as the crosses tested bids around the ?229.75 and ?95.40 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.5565 in the over-the-counter market, down from CNY 7.5604.

The British pound came off vis-a-vis the U.S. dollar today as cable tested bids around the US$ 2.0025 level and was capped around the $2.0140 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from $2.0655 to $1.9650. Data released in the U.K. today saw BBA July mortgage approvals for house purchases fall despite a rise in net mortgage lending. Most traders believe the Bank of England Monetary Policy Committee will lift the repo rate by +25bps to 6.00% by the end of the year. Cable bids are cited around the US$ 1.9885 level. The euro moved higher vis-a-vis the British pound as the single currency tested offers around the ?0.6805 level and was supported around the ?0.6780 level.

The Swiss franc appreciated vis-a-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1960 level and was capped around the CHF 1.2040 level. Technically, today’s intraday low was right around the 23.6% retracement of the move from CHF 1.1815 to CHF 1.2215. Data released in Switzerland today saw the July UBS private consumption index fall to 2.26 from 2.31 in June. Dollar offers are cited around the CHF 1.2140 level. The euro and British pound moved lower vis-a-vis the Swiss franc as the crosses tested bids around the CHF 1.6350 and CHF 2.4055 levels, respectively.