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03/12/2007 | | | |

23:46 GMT | | | |

| High | Low | Close |

USD/JPY | 111.24 | 110.03 | 111.24 |

EUR/USD | 1.4786 | 1.4729 | 1.4633 |

EUR/JPY | 163.86 | 162.2 | 162.78 |

GBP/USD | 2.07 | 2.0533 | 2.0565 |

AUD/USD | 0.8894 | 0.8806 | 0.8842 |

NZD/USD | 0.7754 | 0.7594 | 0.7642 |

USD/SGD | 1.4488 | 1.4446 | 1.4487 |

USD/THB | 30.9 | 30.75 | 30.9 |

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3rd December 2007

Asia Open / Overnight Highlights

- Nov Chicago PMI, 52.9, slightly firmer than 50.5 consensus.

- Oct personal income, 0.2%, PCE, 0.2%, core PCE price index, 0.2%.

- Oct construction spending, -0.8%, weaker than -0.3% consensus.

- Fed Poole: Always appropriate for Fed to discuss further rate cuts to help ease financial turmoil

- Fed Plosser: Important to see if jobs soften in November. Did not anticipate the rise in risk premiums.

- Fed Kroszner - Urges mortgage industry to head of subprime defaults. Credit market revival to take time.

- Treasury Paulson - Expects to have a more detailed plan about mortgage plan to prevent a surge in foreclosures before year-end.

- UAE state news agency withdrew a report saying that the Gulf Aran leaders were expected to agree on currency reforms at Doha this week.

- Dec crude oil, $88.56, -$2.45.

Foreign Exchange: EUR/USD started off slowly and flows remained modest despite hints of some E. European activity. Fed Bernanke's comments, reinforcing the dovish leanings at the Fed, undermined the USD. Once the N. American session got under way, most of the trading focus was elsewhere, but the combination of the rally in equities, the fall in crude oil prices and month-end flows gave USD a bid and prices moved below 1.4675. GBP/USD managed to attach itself to EUR/USD early in the session and moved higher despite the dovish rhetoric from the BoE and soft economic data. Trading was dominated by month end flows with European and N. American names working orders along with UK clearing names.

USD/JPY has been on a slow steady climb. Month end flows, some mention of E. Europeans on the offered side and rising equity prices mixed together to send prices up to highs of 111.23 at the fixing. Trading seemed to come to a halt into the end of the day, bounded by 110.70 below 111.10 above. EUR/JPY and GBP/JPY spent the first half of the day supported by the earlier strength of EUR, which dragged the GBP along. The rally ran out of momentum during the European morning and through the fixing JPY took back a portion of its intraday losses in non-descript trading. GBP/JPY had the usual E. Europeans involved, offering near the highs of 2 29.30.

AUD and NZD came under month end pressure from European and N. American order flows. It is worth pointing out that both Antipodean currencies suffered into the end of the day despite the softness of JPY, which has not been the case in recent equity and JPY dominated trading.

Bonds: The Treasury market opened in negative territory, despite Bernanke's admission Thursday evening that the Fed was concerned about tighter financial conditions since the Oct FOMC. Equities and spread product rallied, encouraging longs to book profits. Equities came off their highs and Treasuries improved. However, month-end activity was more aggressive at the front and intermediate sectors of curve, resulting in the 2yr/30yr steepening by 6 bps to 136 bps.

- Agency spreads: 2s, Freddie/Fannie, -3 bps/-4.5bps, 5s, Freddie/Fannie, -6.5bps/ -6.5bps, and 10s, Freddie/Fannie, -3 bps/ -6 bps.

- Interest rate swap spreads 2 bps to 3 bps tighter.

Equities: The equity market opened at levels that proved to be session highs. The euphoria at the open was based on Bernanke's remarks Thursday night. Profit taking developed, particularly when the DJIA and NASDAQ could not break key resistance levels, as well as disappointment with Dell's outlook for the next quarter or two. Dow closed up 0.45%; S&P climbed 0.78%. Nasdaq lost 0.27%.

Asia Outlook: The stronger dollar overnight should bias USD/Asians upwards in trades today. Bids however look to be limited by the Fed continuing with rhetoric with dovish inclinations, underpinning rate cut hopes in Dec. Crude prices buckling to fall below the $90/barrel support is also seen relieving some of the upward pressure in regional pairings. News that the US govt was close to working out an arrangement with lenders to hold off rate resets, and to maintain steady rates to prevent a wave of defaults and foreclosures on homes also helped to boost overall mkt sentiments. That said, upside risk in USD/Asians cannot be written off altogether. Underlying sentiments largely remain fragile and it would take very little to induce a short squeeze in regional currency pairings. JPY crosses and equity sentiments continue to be the drivers for the currencies.

NORTH ASIA

USD/KRW will head higher and is expected to trade in the 925-930 range. Expected gain in the local bourse will give some downward pressure. The 1-mth NDFs traded in the 920.0-923.2 range in moderate volume and closed at 922.7/923.7, overnight. Data wise, final Q3 GDP growth was revised down to seasonally-adjusted +1.3% q/q from prelim +1.4% q/q. Meanwhile, market awaits Nov trade at 0100GMT and Nov CPI at 0430GMT.

USD/CNY is expected to consolidate with a touch of upside as the dollar surged on Fri night. The pairing is expected to trade amid 7.3850-7.4050 with the surge on Fri likely to give rise to some profit taking before the stronger dollar kicks in to stall falls. The 1-mth NDF traded 7.2180; closed 7.2180-7.2160. China's state agency expects GDP growth and CPI for 2008 to be 10.8% and 4.5% respectively. In other news, China is considering allowing foreign govts to issue CNY denominated bonds with hopes of more foreign companies listing on the local bourse.

USD/HKD is expected to remain biddish, largely led by sustained corporate demand for the greenback. Gain in the currency pair is likely to be limited by continued IPO-related inflows. We are likely to see USD/HKD trade in the upper half of 7.78-7.79 range.

USD/TWD will likely stay in the 32.25-32.35 range, with upward bias. Overnight, the 1-mth NDFs traded in the 32.04-32.07 range in moderate volume and closed at 32.06/32.09.

SOUTH ASIA

USD/SGD was taken higher in overnight trades as the stronger dollar sentiments lent support to the pairings. The pairing is expected to consolidate in the 1.4435-1.4495 range. Inflation bias should cap upside in the USD/SGD while the stronger dollar is expected to limit falls. India has cut import duties on more than 550 products that it imports from Singapore effective Dec 1 as part of its trade deal.

USD/IDR is seen in trades around the 9350 level. The pairing is seen being tugged both ways with Fed rate cut hopes weighing from above while the stronger dollar supports below. Underlying jitters also seen keeping upside risk intact though BI intervention to cap rallies above 9400 can reasonably expected from recent episodes. Intraday