ASIA SUMMARY

Currency volatility in Asia continued as we saw a gap opening from Friday’s closing prices as concerns of the G7 statement mentioning the JPY subsided. There was already some speculation that the JPY would not be mentioned as the JPY crosses were strong on Friday but we saw another spurt higher as the event passed. EUR/JPY traded through 162 but ran into offers around 162.50 area. The opening enthusiasm quickly died down as we saw sellers push the cross all the way back down below 161.50.

EUR/USD opened higher as well as it appears European finance ministers are comfortable with EUR/USD at these levels. USD/JPY was also strong, cleanly breaking through the 119.50 area resistance but the early enthusiasm faded with EUR/JPY as it eventually broke down back below 119.

Part of the reason for the decline in the JPY crosses may be because of worries of pressure from US Treasury Secretary Paulson to increase the value of the Chinese Yuan and make their markets more open. Should China make their currency and economy more flexible, it could be positive for the JPY.

Upcoming Data Release (UK Session):

Japan: (12:30am EDT) Month over month industrial production expected -.2% vs. previous -.2%. Capacity utilization previous was 106.1.

Germany: (2am EDT) Month over month CPI expected .3% vs. previous .3%.

UK: (4:30am EDT) Month over month seasonally adjusted PPI input expected .9% vs. previous 1.3%. Month over month seasonally adjusted PPI output core expected .3% vs. previous .5%.