The euro fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3745 level and was capped around the $1.4030 level. The common currency reached its lowest level since September 2007 as traders reacted to news that the U.S. Senate approved a US$ 700 billion to bail out the troubled U.S. financial system. A similar vote could come in the U.S. House of Representatives tonight or tomorrow. European Union officials rejected talk of an EU bailout plan saying there was no need for one. Several EU leaders will convene in Paris on Saturday. Data released in the U.S. today saw August factory orders fall 4%m the sharpest contraction since October 2006, while the ex-transportation component was off 3.3% and non-defense, ex-aircraft capital orders were off 2.4%. Other data saw weekly initial jobless claims rise 1,000 to 497,000 while continuing jobless claims rose 48,000 to 3.591 million. U.S. interest rates futures are discounting about a 70% chance the Federal Reserve will reduce interest rates by 50bps later this month. The Wall Street Journal reported Fed officials are contemplating a rate cut even if the bailout package passes Congress. As expected, the European Central Bank kept its main refinancing rate target unchanged at 4.25% today but many dealers believe the ECB will soon lower rates. Trichet reported inflation pressures have lessened but remain an economic threat. Data released in the eurozone today saw EMU-15 August producer price inflation moderate. Three-month interbank rates hit a yearly high at 5.355% today, evidencing the ongoing strains in the money market. Euro bids are cited around the US$ 1.3320 level.

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥105.10 level and was capped around the ¥106.30 level. Data released in Japan overnight saw the September monetary base climb 0.9% y/y. Prime Minister Aso said the government will work closely with Bank of Japan to maintain financial stability. The Nikkei 225 stock index lost 1.88% to close at ¥11,154.76. 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 ¥144.85 level and was capped around the ¥148.70 level. The British pound and Swiss franc moved lower vis-à-vis the yen as the crosses tested bids around the ¥184.80 and ¥92.30 levels, respectively.

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.7550 level and was capped around the $1.7725 level. Data released in the U.K. today saw Nationwide house prices register their largest decline in seventeen years, off 1.7% m/m in September. Bank of England’s quarterly credit conditions survey worsened again in Q3 and confirmed that British banks are likely to tighten credit to households and businesses further. Also, the September U.K. construction sector shrank and ISD pay deals rose in the three months to August. Cable bids are cited around the $1.7420 level. The euro slumped vis-à-vis the British pound as the single currency tested bids around the ₤0.7825 level and was capped around the ₤0.7920 level.