The euro moved lower vis-a-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3610 level and was capped around the $1.3655 level. Technically, today’s intraday high was right around the 61.8% retracement of the move from $1.3840 to $1.3360. Liquidity was reduced on account of the U.S. Labour Day holiday. Traders are still talking about remarks from Federal Reserve Chairman Bernanke on Friday in which he indicated the Fed “is prepared to act” to counter disorderly market functioning and minimize the economic impact from the subprime mortgage meltdown. The Federal Open Market Committee will vote on interest rates in 18 September and is expected to reduce the federal funds target rate. Such a move may provide a psychological boost to the markets but its impact on the real economy – especially the beleaguered housing market – may be a different story. Fed Governor Mishkin this weekend indicated “Monetary authorities have the tools to limit the negative effects on the economy from a house-price decline.” The big data due this week in the U.S. include Friday’s August non-farm payrolls report. Many economists estimate that about 110,000 new jobs were created last month and are curious to see if August’s tally of 92,000 will be upwardly revised. In eurozone news, EMU-13 manufacturing PMI fell to a nineteen-month low of 54.3 in August from 54.9 in July. The European Central Bank is now expected to keep monetary policy unchanged this week. Euro bids are cited around the US$ 1.3530 level.

The yen depreciated vis-a-vis the U.S. dollar today as the greenback tested offers around the ?116.10 level and was supported around the ?115.65 level. Today’s range was thin on account of the market holiday in the U.S. Traders sold the yen on account of a report that non-financial firms reduced their capital expenditures in Q2 for the first time in seventeen quarters, off 4.9% on the year. This reduction in business spending is expected to result in a contraction in real GDP for Q2 for the first time in ten quarters. This development is another reason why Bank of Japan’s Policy Board may delay its next expected +25bps hike in the overnight call rate to +0.75%. Most traders now expect BoJ to raise rates one time before the end of the year. Other data released today saw employees’ average pay off 1.9% y/y in July. The Nikkei 225 stock index lost 0.27% to close at ?16,524.93. Dollar bids are cited around the ?114.55 level. The euro lost ground vis-a-vis the yen as the single currency tested bids around the ?157.50 level and was capped around the ?158.40 level. The British pound and Swiss franc appreciated vis-a-vis the yen as the crosses tested offers around the ?234.55 and ?96.20 levels, respectively. The Chinese yuan appreciated vis-a-vis the U.S. dollar as the greenback closed at CNY 7.5443 in the over-the-counter market, down from CNY 7.5450. Data released in China saw the August CLSA PMI survey improved to 53.4 from 53.1 in July. Also, a People’s Bank of China official indicate China is not impacted by U.S. subprime problems.

The British pound gained marginal ground vis-a-vis the U.S. dollar today as the Aussie tested offers around the US$ 2.0215 level and was supported around the $2.0135 level. Bank of England’s Monetary Policy Committee is expected to keep the repo rate unchanged this week. Data released in the U.K. today saw manufacturing PMI improved to 56.3 from 55.9 in July, its strongest level in thirteen years. Other data released today saw EEF report that growth in manufacturing orders books and output reached their highest level since 1995. Most traders expect Bank of England’s Monetary Policy Committee to lift its repo rate by +25bps to +6.00% in the coming months. Cable bids are cited around the US$ 2.0090 level. The euro weakened vis-a-vis the British pound as the single currency tested bids around the ?0.6740 level and was capped around the ?0.6765 level.

The Swiss franc lost marginal ground vis-a-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2095 level and was supported around the CHF 1.2060 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.2470 to CHF 1.1815. Data released in Switzerland today saw the August PMI survey improve to 65.1 from 63.0 in July, exceeding forecasts. Many traders believe Swiss National Bank may delay its expected +25bps monetary tightening this month. Dollar offers are cited around the CHF 1.2140 level. The euro came off vis-a-vis the Swiss franc as the single currency tested bids around the CHF 1.6445 level while the British pound moved higher vis-a-vis the Swiss franc and tested offers around the CHF 2.4410 level.

The Australian dollar gained ground vis-a-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8235 level and was supported around the $0.8155 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from $0.7015 to 0.8870. Data released in Australia today saw the August performance of manufacturing index fall 5.0 index points to 52.4. Also, August ANZ job advertisements were up 0.1% m/m and July building approvals rose 0.4% m/m. Additionally, the TD Securities August inflation gauge was up 0.5% m/m. Most traders expect Reserve Bank of Australia to keep interest rates unchanged this week. Australian dollar bids are cited around the US$ 0.7940 level. The New Zealand dollar moved marginally higher vis-a-vis the U.S. dollar as the kiwi tested offers around the US$ 0.7060 level and was supported around the $0.6995 level. New Zealand dollar bids are cited around the US$ 0.6760 level.