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Thursday, April 30, 2009

Dollar Ends Mixed As Stocks Stall in Afternoon

The dollar put in a mixed performance Thursday, gaining
against the yen but ending
little changed against the euro as stocks rallied in early trading and then
stalled in the afternoon.

Some risk-sensitive currencies, such as the U.K. pound and the Canadian dollar,
advanced against the greenback.
Thinning liquidity ahead of the May Day holiday in several key European countries
on Friday and month-end
flows complicated currency trading Thursday, resulting in a relatively
directionless session.

"It's the last trading day of the month, and there could be some month-end flows
that are driving markets
beyond the usual fundamental sphere," said Dustin Reid, director of G11 forex
strategy at RBS Greenwich
Capital Markets in Chicago.

Currency markets weren't visibly roiled by news at midday that Chrysler LLC
filed for bankruptcy protection
in a plan that would provide new ownership for the ailing auto maker. The owners
will include the U.S.
and Canadian governments, Italian car maker Fiat SpA and a health-care trust fund
for union retirees.

The Chrysler bankruptcy wasn't a major disturbance in the market in part because
it appears the company
will re-emerge in a restructured form, Reid said.

While the euro remained contained against the dollar Thursday, seesawing during
the session between gains
and losses against the greenback, the Canadian dollar continued to push higher.
"The Canadian dollar has been the big mover of the last few days," said Tyson
Wright, senior foreign exchange
trader at Custom House, a currency services firm in Victoria, British Columbia.
Technical factors rather than economic data appeared to be supporting the
Canadian currency, although
it also drew sustenance from expectations of a global economic rebound towards
2010, he said.

Late Thursday, the dollar was trading at C$1.1933, up from a session low at
C$1.1867 but below C$1.2032 late Wednesday.
The euro was at $1.3237, off from 1.3250 late Wednesday, and at Y130.48, up from
Y129.10. The dollar traded
at Y98.62, up from Y97.42 late Tuesday, according to EBS.
The dollar was at CHF1.1413, up from CHF1.1380, while sterling was at $1.4803, up
from $1.4770.

The dollar advanced against the yen as that currency's role as a safe-haven
proved detrimental to it Thursday,
when equities were in positive territory for much of the session.
The dollar reached a high of Y99.00 before ceding some of its gains, according to

The dollar/yen pair will likely continue to trade in recent broad ranges, said
Reid, of RBS Greenwich
Capital Markets. "I think, in general, dollar/yen's going to be rangebound
between Y93.00 and Y100.00
and just continue to bounce around there," he said.

How long equity markets will be able to maintain their positive momentum, and
thus provide support for
risk-sensitive currencies, remains open to question.
"I'm not sure this is sustainable in the short term, because there is still lot
of bad news out there
and this could be more of a bear market equity rally than an actual bull market,"
said Custom House's

Such a development would tend to curb recent strength by the euro, the Canadian
dollar and other similar currencies against the U.S dollar, he said.

The Mexican peso remained under pressure due to persistent concerns about the
swine flu outbreak, with
the U.S. dollar trading around MXN13.8035 in late trading, above MXN13.705 at
Wednesday's close.

A report from Brown Brothers Harriman in New York said the outbreak is
dramatically affecting liquidity
in the peso. "The drop of in liquidity is causing not only greater volatility,
but also a widening of
the spreads between the bids and offers," BBH said

Canada Dollar Pares Early Strength

The Canadian dollar was trading at a firmer level versus
its U.S. counterpart at midday on Thursday but had fallen from its nearly
four-month high.

The Canadian currency's significant early strength was fuelled by broad-based
U.S. dollar weakness, risk appetite on the belief that the worst of the global
economic downturn may have passed and by advancing crude oil futures, according
to market watchers.

However, causing the Canadian currency to pare its gains by midday was news
that U.S. auto maker Chrysler Corp. plans to make a Chapter 11 bankruptcy filing
Thursday after a breakdown in talks with its lenders, market watchers said.

Concern that the move could have a negative impact on the Canadian economy due
to job losses at the company's Canadian plants weighed on the Canadian currency,
they said.

Also undermining the Canadian dollar at midday was a pullback in crude oil
futures and equities, as well as losses in gold futures, traders said.

However, domestic news in Canada on Thursday was mildly supportive. The 0.1%
decline in Canada's gross domestic product in February was in line with
expectations, while a 0.3% increases in industrial product prices in March was
considered positive.

At 1:03 p.m. EDT, the Canadian dollar was trading at 83.61 U.S. cents, or
US$1=C$1.1960, which compares with 83.89 U.S. cents, or US$1=C$1.1920, earlier
in the day and Wednesday's North American close of 83.13 U.S. cents, or

At midday on Thursday the Toronto Stock Exchange was slightly higher, up 19.6
points at 1:03 p.m. EDT to sit at 9,436.0.

USD Reaches New Daily High Vs JPY

USD recently notched a session high at Y98.90, according to
EBS, reflecting the general
improvement in risk sentiment. While JPY had lost its status as the ultimate safe
haven for a while after
the weak 4Q data from Japan, it has recently resumed that status and is therefore
vulnerable in times
of general risk appetite, says Dustin Reid, director of G11 forex strategy at RBS
Greenwich Capital Markets
in Chicago. "With equities bid going into the end of the month, you're seeing
dollar/yen bid," he said.

EURO Regaining Lost Ground As Stocks Rally

EUR regains ground lost earlier in the session as stronger
stocks provide solid underpinning for single currency.

EUR is currently around $1.3275, up from session low at
$1.3190 but still down from
overnight high at $1.3385, according to EBS. GBP has also recovered in recent
trading and is at $1.4846

Wednesday, April 29, 2009

FED Leaves Rates Near Zero; Econ Outlook Improved


U.S. Federal Reserve policy makers Wednesday left the target federal-fundsrate for interbank lending in a range near zero and the discount rate at 0.5%while signaling they might increase the size of programs to buy mortgage-relatedand Treasury securities if needed to keep borrowing costs down and ease theeconomy's path out of recession. The announcement came at the end of a two-daymeeting.

THE DETAILS: The Federal Open Market Committee voted unanimously to keep the target federalfunds rate for interbank lending in a range between 0.0% and 0.25%, where it hasbeen since December. Officials reiterated their pledge to keep rates"exceptionally low" for an extended period. Both rate decisions were universallyexpected by Wall Street economists. Officials also gave a nod to some signs of stability in the economy, echoingrecent remarks by Fed Chairman Ben Bernanke and top White House officials, butstressed that conditions are likely to remain weak. "The economic outlook has improved modestly since the March meeting," thoughit should remain weak "for a time," the FOMC said in a statement. "The pace ofcontraction appears to be somewhat slower," the FOMC said, and officials notedthat consumer spending "has shown signs of stabilizing but remains constrained"by job losses, lower home values and tight credit. The Fed repeated that inflation will remain "subdued" and that it sees somerisk that inflation may stay below rates that best foster economic growth andprice stability. The FOMC wasn't expected to announce major policy steps, as they did on March18, when they presented plans to buy as much as $300 billion in Treasury bondsto keep other interest rates low.


Stocks, which were up sharply before the announcement, rose further after theFed's release, with the DJIA closing up 168.78, or 2.11%, at 8185.73. The S&P500 finished the day up 18.48 points, or 2.16%, at 873.64. The NASDAQ Compositeened up 38.13 points, or 2.28%, at 1711.94.

Treasurys prices mostly sank at the long end amid disappointment over a lackof any new action. The 10-year yield rose to 3.10%. The 30-year yield rose to4.03%.

The dollar was generally higher after the Fed said it might increase the sizeof programs to buy mortgage-related and Treasury securities WHAT THEY'RE SAYING:

-The Fed still sees green shoots and believes the U.S. economy will begin torebound later this year, says Sherry Cooper, chief economist at BMO CapitalMarkets. "The Fed also feels inflation will remain low despite its running theprinting presses and despite massive fiscal red ink," she says.

-"It's not over the top, but certainly hopeful," Stephen Stanley, chiefeconomist at RBS Greenwich Capital, said of the FOMC's statement that the U.S.economic outlook has improved modestly.

-"Emphasizing the timing of such purchases is a warning to market participantsto expect either accelerated purchases or more aggressive purchases whenconditions warrant," Tony Crescenzi, strategist at Miller Tabak, said of theFOMC's statement that it will continue to evaluate the timing and amounts ofsecurities purchases.

-With the Fed announcement past, the Treasury market can now focus on themassive amount of supply coming next week, said Sean Simko, head of SEI fixedincome management, and given supply, yields are likely to continue to pushhigher.


=WSJ:Fed To Continue Aggressive Efforts To Revive Fincl System 2nd UPDATE: Fed Leaves Rates Near Zero; Outlook Has Improved US Stocks Rally Continues After Fed Statement

=Treasurys Fall, Dollar, Stocks Gain As Fed Turns Slightly Upbeat

=WORLD FOREX: Dollar Falls Vs Most Despite Less Downbeat Fed

=FED WATCH: FOMC Meeting Sign Of Somnolent Times To Come CREDIT MARKETS: Debt Markets Gain On Fed's Positive Turn

=POINT OF VIEW: Stock Market Takes Fed As Best Of Both Worlds

=OFF THE RUN: On The Path To Higher Yields

=Treasurys Prices Drop, Yields Hit Year Highs On Fed Statement

Eurodollar Futures See Sub -1% Libor In June

Leading up to FOMC announcement, Jun Eurodollar futuresmatches its highest level of the day, reflecting expectations for underlying3-month dollar Libor to fall below 1%.

Recently at day's high of 99.04, up 4.5BP, seeing Libor at 0.96% when contract expires June 15.

Canadian Dollar Holds Onto Early Gains

The Canadian dollar was trading at a sharply higherlevel against its U.S. counterpart at midday on Wednesday. The Canadian dollar held on to its early advances as the improved marketsentiment that lifted the currency in early activity showed no signs of fading,analysts said.

There is cautious optimism that the global economic slowdown is running out ofsteam, which is helping to ease risk aversion, they said. Commodity-sensitive currencies, including the Canadian dollar, were alsounderpinned Wednesday by strength in crude oil futures, which at middaycontinued to trade about US$50 a barrel.

Technically-based buying interest and suggestions that the Canadian dollar hasfurther upside potential further helped to lift the Canadian currency, traderssaid. In domestic news, Statistics Canada reported Wednesday that non-farm payrollemployment fell by 79,600 in February, down 0.5% from a month earlier.

Thelargest declines were seen in the manufacturing sector. At 12:58 p.m. EDT, the Canadian dollar was trading at 83.24 U.S. cents orUS$1=C$1.2013, which compares with 83.22 U.S. cents or US$1=C$1.2016 earlier inthe day and Tuesday's North American close of 81.93 U.S. cents or US$1=C$1.2205.

At midday on Wednesday the Toronto Stock Exchange was higher, up 73.4 pointsat 12:58 p.m. EDT to sit at 9,421.4.

USD/CAD Notches New Daily Low

Selling pressure on USD/CAD is persisting in light of the robust tone in stocks,with USD/CAD just registering a sessional low at 1.1993 before popping back to the 1.2010 area, accordingYou can use this link on the day this article is published and the following day.