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01/11/2007 | | | |

23:40 GMT | | | |

| High | Low | Close |

USD/JPY | 115.51 | 114.77 | 115.43 |

EUR/USD | 1.4508 | 1.4419 | 1.4487 |

EUR/JPY | 167.28 | 165.86 | 167.22 |

GBP/USD | 2.0825 | 2.0689 | 2.0797 |

AUD/USD | 0.9345 | 0.9209 | 0.9342 |

NZD/USD | 0.7738 | 0.764 | 0.7733 |

USD/SGD | 1.4495 | 1.4456 | 1.4468 |

USD/THB | 31.661 | 31.6 | 31.62 |

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1st November 2007

Asia Open / Overnight Highlights

- FOMC lowered funds and discount rates by 25bps each to 4.50% and 5.00%. Communique was not as dovish as market hoped - Fed indicated that inflation risks were roughly equal to that of a slowdown. Vote was 9-1 (Hoenig was opposed to rate cuts). Upside risks to inflation and downside risks to growth are roughly in balance.

- Oct ADP Private payrolls, 106k, stronger than 58k consensus; Sep DP revised yp to.

- Advance Q3 GDP, 3.9%, stronger than 3.1% consensus. Core PCI price index, 1.8%.

- Oct Chicago PMI fell to 49.7. Market expected 53.0.

- Q3 ECI, 0.8%, slightly lower than 0.9% consensus.

- Treasury announced $13b 10s and $5b reopened 30yrs, as expected.

- Dec crude oil, $95.33, $3.95.

Foreign Exchange: EUR/USD maintained a bid tone through the stronger than expected US GDP data. Buyers were buoyed by much firmer than expected Eurozone CPI, while the tone from ECB speakers remained hawkish, with Weber again to the fore, though Quaden added to it late in the European day. USD was initially bid after the FOMC, but sellers stepped in and new record highs above 1.4500 followed. GBP remained in demand as the timing of any interest rate cut remains open to debate, cable printing highs above 2.0800 while GBP/JPY pushed to reach 240.00. BoE Bean's balanced set of comments late on the session had limited impact.

USD/JPY consolidated its push up through 115.00, but with USD generally for sale at the London fix and after the FOMC, the pair remained stuck between 115.20 and 115.50. EUR/JPY and the rest of the crosses posted good progress getting an extra boost from commodity currency buying after the FOMC. EUR/JPY reached 157.00 into the close. EUR/CHF was supported by decent demand from a UK clearer following yesterday's Roth inspired dip, though the rally faltered late on.

Bonds: The market began the session under modest pressure due to the stronger than expected ADP and Q3 GDP reports. Real money helped stabilize the market, but prices crumbled after the FOMC outcome. Selling was aggressive and led by leveraged accounts. The 2yr/30yr spread flattened 7 bps to 80 bps.

- Agency spread: 2s, unch, 5s, unch, 10s, -0.5 bps.

- Interest rate swap spreads were unch.

Equities: The equity markets rallied into the FOMC outcome. Initially, the major indexes surrendered their gains, focusing on the bond market's reaction. However, weakness attracted buyers and the market returned towards session highs. The Dow was up 1% at close while S&P and Nasdaq notched up 1.2% and 1.51% in gains respectively.

Asia Outlook: The combination of the dollar slumping to records lows and the enthused rally on Wall St overnight - on the back of the Fed's 25bps rate cut - is seen setting USD/Asians up for another session of downside interest. Short dollar positions will likely continue to be the favoured position to take against a backdrop of lower interest rates projected in the US. The expected inward flow of funds into regional bourses is seen weighing further on regional pairings. Some caution could fall due as the focus now shifts to US payroll data on Fri and this could place a limit on downside. Central bank intervention and record high oil prices too are seen hampering weakness in the dollar-regional pairings.

NORTH ASIA

USD/KRW is likely to be weighed by the stock market rally. However, downside is likely to be limited amid concern over intervention from the authorities. A senior official from the foreign exchange authorities told Reuters that they would take stern measures against speculative trades in the currency market. USD/KRW will likely be kept above the 900 level, but a successful attempt to move lower will expose the currency pair to the next support at 896. Meanwhile, on the topside, we see resistance at 910. The 1-mth NDFs traded in the 900.5-904.0 range and closed at 900.5/901.5 overnight. Data wise, market awaits Oct trade (0100GMT) and CPI (0430GMT).

USD/CNY expected to continue its downward slide on heavy dumping in the NDFs and after Fed cut. PBOC has shown its intent to allow a faster rate of appreciation for the CNY and the trend should continue in this session. China will raise the prices of gasoline, diesel oil and aviation kerosene by CNY 400 from today. Overnight NDFs traded range of 7.4100/7.4110 and closed down at 7.4085/7.4105.

USD/HKD likely to come under more intense pressure on stocks and IPO demands. Continued USD weakness after Fed cut and specs also likely to thump the pairing against the 7.75. HKMA has thus far been committed to defending the peg after intervening 5 times and injecting HKD 7.828 bln yesterday. Retail sales out at 0715 GMT.

USD/TWD seen heading for near term support at 32.55 after the 25 bps Fed rate cut and overnight Wall Street rally. Foreign inflows are expected to be reignited by the overnight events although market is wary of both central bank and oil importers' bids. Overnight NDFs traded range of 32.24/32.30 and closed down 32.22/32.24. Taiwan stock exchange is in talks with major bourses in NY and Germany as its seek to boost its profile through tie ups with major global players.

SOUTH ASIA

USD/SGD likely to extend losses on Fed rate cut although downside could be capped by central bank and as market gears up for Friday's NFP. Foreign funds selling likely to pound the pairing lower towards 1.4470 support intraday. Oct PMI due out later in the day.

USD/IDR is expected to start the day on its backfoot following the pull-back in the dollar overnight. NDFs tumbled last night, trading in the 9060-9100 range before closing at a soft 9050-9070. Upside in US equities should also set the tone for funds to make their way into the Jakarta bourse though some caution over oil prices should cap the topside. USD/IDR is seen gapping below the 9085 level and trading amid 9035-9100 intraday with the soft dollar above and yield plays above while cautious short covers and corporate bids dwell below. Expect BI to smooth out volatility in trades. Datawise Oct CPI is expected at 0600GMT while Sep trade numbers are expected at 0700GMT.

USD/MYR will likely test the 3.3350 level under the present market condition. A breach will move the currency pair to face the next and firmer support at the 3.3280 mark. Overnight, the 1-mth NDFs closed at 3.3200/3.3230 amid 3.3230-3.3290 range.

USD/PHP mkts are closed for a local holiday today and tomorrow. Normal trades are expected to resume on Mon. Philippines' SM Investments Corp has agreed to sell all its San Miguel stakes for some PHP27 bln ($620 mln).

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