The euro fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3975 level and was capped around the $1.4175 level. The common currency reached its weakest level since 11 September as traders speculated the U.S. Senate would pass a US$ 700 billion bailout package for troubled financial institutions later in the day and apply pressure on the House of Representatives to pass similar legislation tomorrow. There are also reports the legislation contains provisions for the Federal Deposit Insurance Corporation to raise its depositor protection to US$ 250,000 from $100,000. Data released in the U.S. today saw ADP September private sector jobs fall 8,000 and August’s payroll tallies were revised to -37,000 from -33,000. Most traders expect Friday’s September non-farm payrolls report to be weak on account of the ongoing volatility in the U.S. banking industry and financial markets. Other U.S. data saw September construction spending flat while the September ISM manufacturing index fell to 43.5 and was much lower than expected. In eurozone news, EMU-15 unemployment printed at 7.5% in August, up from 7.4% in July. Also, German retail sales climbed 4.6% m/m in August and EMU-15 manufacturing activity fell to a near seven-year low at 45.0 in September. The European Commission released new regulations for banks and investment firms to improve regulatory oversight and improve the quality of banks’ capital. The European Central Bank is expected to keep borrowing costs unchanged tomorrow but dealers expect President Trichet to acknowledge the significant slowdown in the economy and highlight moderating inflation and downwide risks to economic growth. Euro bids are cited around the US$ 1.3840 level.

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.50 level and was supported around the ¥105.70 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from ¥124.15 to ¥95.70. Bank of Japan’s quarterly tankan survey was released overnight and saw Japanese business sentiment turn negative for the first time in five years as the big manufacturers’ business sentiment printed at -3. It was also reported that large firms see capital expenditures up 1.7% in the 2008-2009 fiscal year. Some dealers believe the Japanese economy will enter a recession this year. Other data released overnight saw August wage earners’ total cash earnings off 0.3% y/y, the first decline this year. The Nikkei 225 stock index gained 0.96% to close at ¥11,368.26. U.S. dollar bids are cited around the ¥102.45 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥148.50 level and was capped around the ¥150.55 level. The British pound and Swiss franc slumped vis-à-vis the yen as the crosses tested bids around the ¥187.60 and ¥94.10 levels, respectively.

The British pound fell sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7650 level and was capped around the $1.7870 level. Stops were reached below the $1.7730 level, representing the 76.4% retracement of the move from $1.7440 to $1.8670. Data released in the U.K. today saw services output rise 0.6% m/m in July and remain stagnant in the quarter to July, the first lack of quarterly growth since 2002. These data underscore the view the U.K. economy is probably in a recession. Also, the September manufacturing PMI fell to 41.0 from 45.3 in August. Cable bids are cited around the $1.7420 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7950 level and was supported around the ₤0.7890 level.

The Swiss franc lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1290 level and was supported around the CHF 1.1145 level. Trading remains volatile for the franc on account of safe-haven trading activity related to the U.S.’s failure to pass the US$ 700 billion bail-out package. Data released in Switzerland today saw manufacturing PMI contract for the first time in 3.5 years in September, falling to 47.8. U.S. dollar offers are cited around the CHF 1.1390 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5720 and CHF 1.9805 levels, respectively.