The euro fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4300 figure and was capped around the $1.4565 level. The U.S. dollar rocketed as U.S dollar liquidity sharply plummeted around the world on account of the ongoing financial crisis. The Federal Reserve sharply increased the size its 84-day Term Auction Facility and lifted its swap lines with Bank of Japan, the European Central Bank, Bank of Canada, Swiss National Bank, Reserve Bank of Australia, and Scandinavian central banks. Data released in the U.S. today saw the August Chicago Fed’s manufacturing index fall 2.6% m/m. Also, August consumer spending was unchanged and August personal income was up 0.5%. The core personal consumption expenditure price index was up +0.2% m/m and 2.6% y/y, matching its largest annual increase since January 1995. U.S. legislators are said to be close to agreeing on the US$ 700 bailout to aid troubled financial institutions. In eurozone news, France’s jobless total jumped to 1.95 million in August and the European Central Bank lent banks €120 billion in a special term tender to smooth liquidity pressures. In eurozone news, EMU-15 economic sentiment fell sharply in September. European financial giant Fortis received an emergency €11.2 billion capital infusion from Benelux governments and is selling most of its stake in ABN AMRO. Euro bids are cited around the US$ 1.3840 level.

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥104.55 level and was capped around the ¥106.95 level. Bank of Japan Governor Shirakawa reported the central bank doubled its offers of three-month liquidity to US$ 20 billion, noting “dollar liquidity has almost dried up.” The Fed also increased its maximum aggregate U.S. dollar swap line with Bank of Japan to US$ 120 billion. BoJ Deputy Governor Nishimura said recent market turmoil has been “extraordinary” and said the BoJ will not rule any policy options out but added the central bank will maintain a neutral policy for the time being. The cabinet approved a supplementary budget of US$ 17 billion to fund an economic package. New Prime Minister Aso said “the most urgent agenda of all is to restore Japan’s economic health.” Data released in Japan overnight saw August retail sales climb +0.7% y/y. The Nikkei 225 stock index lost 1.26% to close at ¥11,743.61. U.S. dollar bids are cited around the ¥102.45 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥150.90 level and was capped around the ¥155.10 level. The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥189.10 and ¥95.70 levels, respectively.

The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7955 level and was capped around the $1.8365 level. U.K. lender Bradford & Bingley was nationalized this weekend on account of the global credit market turmoil. Retail deposits and branches were purchased by Banco Santander’s Abbey National Plc. Data released in the U.K. saw August net mortgage lending collapse with mortgage approvals lower at 32,000. Also, M4 sterling lending increased to ₤22.5 billion in August from ₤12.4 billion in July and August net consumer credit edged higher to ₤1.2 billion. Cable bids are cited around the $1.7730 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8025 level and was supported around the ₤0.7905 level.