Foreign Exchange Market Daily Update

The US dollar remains weak against the euro after the ADP Employer Services report showed unexpected job losses in the US private sector raising fears of a softer non-farm payrolls report on Friday. US private employers cut 23,000 jobs in February, compared to market expectations for 20,000 new private-sector jobs, causing the largest drop since April 2003. However, the greenback rose against the yen after a higher-than-expected ISM services report. The Institute for Supply Management said its non-manufacturing index climbed to 49.3 in February, beating expectations for a reading of 47.0 and above January's 44.6. A reading below 50 though, means a contraction which supports more interest rate cuts in the US.

The euro retreated slightly from record highs on speculation European Central Bank President Jean-Claude Trichet will signal after tomorrow's policy meeting the euro-zone's currency is too strong. The ECB is expected to keep its benchmark rate at 4.0%.

The British pound pared losses versus the euro and dollar after UK services PMI data came in stronger than expected, highlighting inflation concerns to UK policymakers. Growth in Britain's services unexpectedly picked up to its fastest pace in five months and input and output inflation hit a record high. The Bank of England is expected to leave its key interest rate at 5.25% at tomorrow's monetary meeting.

The Japanese yen weakened against the dollar after stronger-than-expected US economic data. Asian stocks continued to fall for a fifth day, led by financial and energy companies, on concern slowing economic growth will hurt loan demand and after oil retreated from a record high overnight.

The Canadian dollar rose slightly against the greenback as oil and gold prices rebounded this morning, supporting the commodity-linked currency.

The Australian and New Zealand dollars fell across the board as Australia's economy grew at the slowest pace in more than a year in the fourth quarter as construction declined and bottlenecks at ports cut exports. Rising borrowing costs, tighter lending standards, the local currency's gain and the global slowdown are significant dampening forces that will cool Australia's economic expansion. Kiwi fell after Federal Reserve Chairman Ben S. Bernanke said the U.S. housing slump may deepen, spurring investors to avoid so-called carry trades and reduce holdings of higher-yielding assets.

Union Bank of California
The Bank of Tokyo-Mitsubishi Group

Posted in: Economy,Finance and Investment,Forex