Strategists at Standard Bank sees the dollar moving higher vs the euro and sterling and lower vs the yen going forward. "If there's a bubble in the carry trade and this bubble is in the process of exploding, then both the dollar and the yen have a lot further to rise," they say. With the bulk of the "carry trade" funding done in the low yield yen, rather than the dollar, the yen could be a "star performer" over the next year. "This is why we target a move to Y95 against the dollar over the coming year and Y125 against the euro," the strategists say. Standard looks for the ECB to lower rates to a "two handle" by the end of 2009 - maybe to 2.0% even, well below consensus at 3.75%. Standard has a one-year euro forecast of $1.3000. The strategists see the BOE moving to 3.5% or even 3.0% rather than consensus (year end '09) at 4.25%. The strategists have a one-year forecast of $1.6900. Euro holds currently at $1.4102, yen at Y107.98 and sterling at $1.7527.

Stocks head back toward session lows as the market comes under broad-based selling interest. Meanwhile, the dollar continues to rally, now up 1.1% against a basket of world currencies.
Treasuries on the long end of the curve are now trading higher, with the 10-year note up six ticks and the 30-year bond up 21 ticks. The 10-year note was down 27 ticks early this morning.

Rate remaims under pressure on continued stop-loss driven sales both here and in cable. Some support is at $1.4016/40 Lows Oct 2007, 61.8% projection of $1.6040/1.4632 decline, and traders say order books remain thin.

Stocks recover some gains, with the Nasdaq back in positive territory.

Low print at $1.4095 in recent trade but volumes remain patchy, as does liquidity. Bids ahead of $1.4100 absorbed, demand interest left in place to $1.4090 but stops are in place below. In the case of the breack under $1.4090 there is nothing really significant until Oct 2007 low at $1.4016. On longer term charts a trend line from February 2002 comes in at $1.3890.

The yen fell the most in two weeks against the dollar as the U.S. government's takeover of Fannie Mae and Freddie Mac encouraged investors to buy higher-yielding assets.
The yen also slumped by the most in six months against the Australian and New Zealand dollars, two favorites of so-called carry trades, as stocks rose on speculation support for the two mortgage companies will stem a crisis that has caused more than $500 billion of losses and writedowns. The dollar advanced against the euro for an eighth day.
``All equity markets are firmly higher on the Fannie and Freddie development and risk appetite is receiving a boost,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``All the yen crosses are being pushed higher on the back of this.''
The dollar will trade in a range of between $1.4450 and $1.4270 versus the euro while investors evaluate the impact of the Fannie and Freddie rescue plan, before resuming its ``upward trend,'' Klawitter said. Against the dollar, the yen will fall to 109 yen, he said.
Stocks climbed around the world, led by financial companies. The MSCI World Index added 2.5 percent. The Standard & Poor's 500 Index gained 2.2 percent, while the Dow Jones Industrial Average rose 2.5 percent.
Treasuries tumbled, with 10-year yields rising the most in almost two months. Japanese 10-year bond yields climbed to a one-month high.
The U.S. government seized control of Fannie Mae and Freddie Mac yesterday after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies making up almost half the U.S. home-loan market.
The Treasury can buy as much as $100 billion of a special class of stock in each company as needed to maintain their positive net worth. It will also provide secured short-term funding to Fannie, Freddie and 12 federal home-loan banks, and purchase mortgage-backed debt in the open market.
``The dollar will continue to outperform the euro,'' said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. ``Most of bad news in the U.S. has been priced in, and the bailout of Fannie and Freddie is viewed as positive.''

Oil now trading at lowest level since April 1.

The tech sector (-0.4%) slips into negative territory. Large-cap names are showing the most weakness, with the Nasdaq 100 down 0.5%. Apple (AAPL 155.74, -4.44), Qualcomm (QCOM 46.62, -1.05) and Research In Motion (RIMM 101.33, -5.62) are the worst performing names.
The energy (-0.3%) and materials (-0.1%) sectors fall into the red shortly after tech.
The S&P 500 and Dow post solid gains of more than 1%, while the Nasdaq hovers slightly above the unchanged mark.

Prices were up as much as 3.5% as traders speculated that Hurricane Ike could damage production in the Gulf of Mexico.

ML economist David Rosenberg says "From my lens, policymakers have continued to react to events because they've been unable to get ahead of them" but crises tend to end in large govt intervention.

The stock market trades with a strong gain, with all ten sectors advancing. The financial sector (+3.6%) leads the way, while the energy (+0.4%) and material +0.2%() sectors underperform on a relative basis.
Tech (+0.6%) is trailing the broader market. Oracle (ORCL 19.58, -0.49) and Dell (DELL 20.33, -0.08) fall on no apparent catalyst. SanDisk (SNDK 16.33, -1.31) falls 7.4%, succumbing to profit taking after surging 30% in the previous session on reports that Samsung may be interest in taking over the flash memory manufacturing. The tech-heavy Nasdaq 100 is unchanged, compared with the S&P 500's advance of 1.9%.
In commodity trading, crude prices are up 0.5% to $106.73 per barrel in volatile trade. Prices were up as much as 3.5% as traders speculated that Hurricane Ike could damage production in the Gulf of Mexico.

EUR/USD: $1.4500, $1.4650, $1.4750

USD/JPY: Y108.50, Y109.30, Y109.60, Y110.20

GBP/USD: $1.7500

EUR/GBP: stg0.8150

Kiwi: $0.6750

A sharply higher open is expected (S&P futures +34.20, Nasdaq futures +28.25).
Altria is acquiring smokeless tobacco manufacturer UST for $69.50 per share, or $11.7 billion, confirming media reports regarding buyout talks last week.
Futures rally on hopes that the credit market turmoil will ease after the U.S. government placed Fannie Mae and Freddie Mac under conservatorship. The Treasury will provide as much as $200 billion in the companies. Some of the biggest financial names are spiking on the news; Citigroup is up 12%, Bank of America (BAC) is up 9% and JPMorgan Chase is up 5.7%. As stock futures rally, the long end of the Treasury curve falls.
In other news, Washington Mutual became the latest company to oust its CEO following heavy losses related to the credit market turmoil, according to the Wall Street Journal.

Crude oil prices are squeezing higher on back of concerns over Hurricane Ike, which is currently hitting Cuba hard, according to the latest update from the National Hurricane Center and
approaching the Gulf of Mexico say forecasters. Traders also note uncertainty ahead of the OPEC meeting Tuesday in Vienna, where most analysts expect the cartel to keep its quota levels unchanged. WTI Nymex crude oil hits $109.75 level as floor trading opens and short-covering extends, now trading up $3.52.

EGBs are lower Monday, but off their worst levels following decision by the US Government to capture control of troubled mortgage giants Fannie Mae and Freddie Mac on Sunday, placing the mortgage giants under conservatorship by their federal regulator, the Federal Housing Finance Agency. The announcement triggered sharp buying in global stocks, amid increase in risk appetite, however, most traders remain skeptical and see the Government measures are seen as temporary, with the cost to taxpayers also seen as uncertain.
``All equity markets are firmly higher on the Fannie and Freddie development and risk appetite is receiving a boost,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``All the yen crosses are being pushed higher on the back of this.''
The markets have taken the news reduced chances of a Fed rate cut. In addition, the bailout is seen as move to ease financial conditions, whilst the ECB collateral change announcement on Thursday effectively means tighter monetary conditions in Europe.
The dollar dipped against the euro and British pound before reports this week that economists estimate will show U.S. home and retail sales declined.

EUR/USD lost over 200-points on the session, ending the morning extending Friday's lows down to $1.4164 before a bounce to $1.4220 into early NY.

GBP/USD dipped to $1.7675 initially, later extending the lows to $1.7566.

In second half of day in focus will be Canadian Building Permits (12:30 GMT) and US Consumer credit (19:00 GMT). At 17:30 GMT start Fed's Fisher's speech .

- Politics not played a role in GSE bailout
- Concern outside, inside US about GSEs
- GSE takeover structured to protect taxpayer
- Financial markets need functioning GSEs

EGBs are lower Monday, but off their worst levels following decision by the US Government to capture control of troubled mortgage giants Fannie Mae and Freddie Mac on Sunday, placing the mortgage giants under conservatorship by their federal regulator, the Federal Housing Finance Agency. The announcement triggered sharp buying in global stocks, amid increase in risk appetite, however, most traders remain skeptical and see the Government measures are seen as temporary, with the cost to taxpayers also seen as uncertain.
``All equity markets are firmly higher on the Fannie and Freddie development and risk appetite is receiving a boost,'' said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. ``All the yen crosses are being pushed higher on the back of this.''
The markets have taken the news reduced chances of a Fed rate cut. In addition, the bailout is seen as move to ease financial conditions, whilst the ECB collateral change announcement on Thursday effectively means tighter monetary conditions in Europe.
The dollar dipped against the euro and British pound before reports this week that economists estimate will show U.S. home and retail sales declined.
``The dollar still stands to weaken against major currencies,'' said Osamu Takashima, chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank. ``The U.S. economy is worsening. The Fed's benchmark rate is justified given the labor market outlook.''

FX strategists at CIBC World Markets say the sustained break below long-term trend support at $1.4300 overnight "signals a definitive end to the last 3-years of protracted euro strength." However, they prefer to sell the rally in the pair and would use any run-ups toward $1.4550 to add to their shorts. "For now, $1.5000 should be used as a risk point, and we are looking for euro-dollar to trade lower towards $1.3500, the mid-point of the $1.33/$1.38 support zone," the strategists say.

Resistance 3: Y111.80
Resistance 2: Y110.60
Resistance 1: Y109.00
Current price: Y108.30
Support 1: Y108.10
Support 2: Y107.30
Support 3: Y105.60
Comments: Tech on USD/JPY has't change. Resistance is around session high on Y109.00. Above the target comes at stronger level on Y110.60 (Aug 15 high), further – on Y111.80/90 (02 Jan high). Session low comes at support on Y108.10. If sales resumes, the rate may test Y107.25/30 (Friday’s highs) and then – to trend support line from Mar 17, passing today at Y105.60.

Resistance 3: Chf1.1450
Resistance 2: Chf1.1340
Resistance 1: Chf1.1295
Current price: Chf1.1265
Support 1: Chf1.1200
Support 2: Chf1.1070
Support 3: Chf1.0940
Comments: USD/CHF has receded from the bottom border of the upward channel from Jul 16, limited today by Chf1.1070/Chf1.1450 (key support/resistance respectively). Under Chf1.1070 losses may widen to Sep 01 lows on Chf1.0940/50. Resistance comes at session’s highs on Chf1.1295. Above rate may recover to Chf1.1330/40 (Jan 02 high) and then – to a key resistance at channel line on Chf1.1450.

Resistance 3: $1.8150
Resistance 2: $1.8000
Resistance 1: $1.7980
Current price: $1.7650
Support 1: $1.7660
Support 2: $1.7540
Support 3: $1.7420
Comments: Strong resistance comes at around $1.7980-$1.8000 - hannel resistance line from Aug with a break above will open the way to $1.8150 (23.6% of $2.0130 - $1.7540 move). If the pressure resumes, support is around $1.7660. Strong level is around Friday’s lows on $1.7540 with a break under will target channel line on $1.7420 (also 50% of $1.3560 - $2.1160 rise).

Resistance 3:$1.4620
Resistance 2: $1.4510
Resistance 1: $1.4430
Current price: $1.4220
Support 1: $1.4200
Support 2: $1.4120
Support 3: $1.4000
Comments: EUR/USD sustains losses. Stronger support comes – around $1.4190/00 (Friday’s lows). Below losses may widen to $1.4120 (21 Oct 2007 low), then to $1.4000. Strong resistance comes at session high at $1.4430, then at channel resistance line from Jul 31 on $1.4511. Above the target comes at 23.6% Fibo on $1.4620 ($1.6030 - $1.4190 decline).

EUR/USD: $1.4500, $1.4650, $1.4750
USD/JPY: Y108.50, Y109.30, Y109.60, Y110.20
GBP/USD: $1.7500
EUR/GBP: stg0.8150
Kiwi: $0.6750

GBP/USD refreshed session lows near $1.7660/65 after the release of weaker-than-expected PPI report. Bids in this area so far managing to contain, with a break below set to open up a potential deeper move towards Friday's base at $1.7537.

EUR

Bids: $1.4270/60

Offers: $1.4430, $1.4470

JPY

Bids: Y107.80/70

Offers: Y109.00/10

GBP

Bids: $1.7820, $1.7960/80

Offers: $1.7710/00, $1.7680/70

USD/JPY found support in the Y108.35 area before a strong bounce. Exporter supply capped the rally at Y109.05 in Asia, offers now said to come in up to Y109.20 with stops above. Techs then note 76.4% of the move from Y110.65 to Y105.70 coming in at Y109.48.

The yen fell by the most in three months against the euro and dropped versus the dollar as the U.S. government's takeover of Fannie Mae and Freddie Mac prompted investors to buy higher-yielding assets.

The yen slumped by the most in six months against the Australian and New Zealand dollars, two favorites of so-called carry trades, on speculation support for the two largest U.S. mortgage financiers will stem a crisis that has caused more than $500 billion of losses and writedowns.

The dollar dipped against the euro and British pound before reports this week that economists estimate will show U.S. home and retail sales declined.

EUR/USD tested $1.4430 before falling to $1.4324.

GBP/USD printed session high on $1.7980 before slipping to $1.7750. Later rate recovered to $1.7800.

USD/JPY held within the Y108.10/Y109.00 range.

At 08:30 GMT UK PPI report is due to come.

U.S. retail sales excluding cars and trucks dropped 0.2% in August, the first decline since February, according to the median projection of economists, after a 0.4% gain in July. The Commerce Department is scheduled to release the retail sales report on Sept. 12.

Japan's benchmark stock indices ended Monday's session sharply higher. The Nikkei 225 was higher by 412.23 points, or 3.38%, at 12624.46. The broader-based TOPIX was 45.57 points higher at 1216.41.

Crude oil fell to a five-month low as the dollar climbed and U.S. unemployment rose more than expected, signaling a slowdown in demand. Oil declined 8 percent this week, the most since July, as the dollar rose to the highest this year against the euro. Payrolls fell in the U.S., the world's biggest energy-consuming country, the Labor Department said today. U.S. fuel demand during the past four weeks was down 3.5% from a year ago, the Energy Department said.

The Organization of Petroleum Exporting Countries, the supplier of 40% of the world's oil, will meet to discuss production and prices on Sept. 9 in Vienna. Venezuela and Iran have made calls to trim supply because prices have dropped 28% from the record $147.27 reached July 11. Saudi Arabia, the world's largest oil producer and OPEC's most influential member, hasn't said what its position on production will be at the meeting. The desert kingdom decided to unilaterally raise output by 500,000 barrels a day during June and July to curb the rise in oil prices.

Wall Street stocks were mixed on Friday after a rally in financials helped soften news that the unemployment rate reached a five-year high in August. The modest recovery on Friday brought to an end a volatile holiday-shortened week during which the the S&P 500 fell 3.2% as fears returned about the health of the global economy. That was the index’s third weekly drop and its biggest loss since February.

Financials were among the biggest casualties but climbed strongly, adding 3.2% amid speculation Blackstone Group and KKR, would buy some businesses from Lehman Brothers’ as part of a deal worth around $5bn. Lehman Brothers rose 6.8%. Selling was widespread, though sectors and companies most exposed to the prospect of a global slowdown were particularly badly hit. Industrials, materials and technology fell 3.9%, 5.4% and 6.5% respectively.

Resistance 3: Y111.80
Resistance 2: Y110.60
Resistance 1: Y109.00
Current price: Y108.36
Support 1: Y108.10
Support 2: Y107.30
Support 3: Y105.60
Comments: USD/JPY quite volatile today with resistance is around session high on Y109.00. Above the target comes at stronger level on Y110.60 (Aug 15 high), further – on Y111.80/90 (02 Jan high). Session low comes at support on Y108.10. If sales resumes, the rate may test Y107.25/30 (Friday’s highs) and then – to trend support line from Mar 17, passing today at Y105.60.

Resistance 3: Chf1.1450
Resistance 2: Chf1.1340
Resistance 1: Chf1.1210
Current price: Chf1.1177
Support 1: Chf1.1070
Support 2: Chf1.0940
Support 3: Chf1.0840
Comments: USD/CHF still holds a bit above the lower bound of the upward channel from Jul 16, limited today by Chf1.1070/Chf1.1450 (key support/resistance respectively). Under Chf1.1070 losses may widen to Sep 01 lows on Chf1.0940/50, then – to Chf1.0840 (Aug 21 low). Resistance comes at session’s highs on Chf1.1210. Above rate may recover to Chf1.1330/40 (Jan 02 high) and then – to a key resistance at channel line on Chf1.1450.

Resistance 3: $1.8240
Resistance 2: $1.8150
Resistance 1: $1.8000
Current price: $1.7900
Support 1: $1.7780
Support 2: $1.7660
Support 3: $1.7540
Comments: GBP/USD rises the first day of a new week ahead of the PPI report. Strong resistance comes at channel resistance line from Aug 31 on $1.8000 with a break above will open the way to $1.8150 (23.6% of $2.0130 - $1.7540 move). Above the resistance comes at $1.8240 (Aug 29 high). If the pressure resumes, support is around $1.7780 (session low), then – at $1.7660. Strong level is around Friday’s lows on $1.7540.

Resistance 3:$1.4760
Resistance 2: $1.4620
Resistance 1: $1.4510
Current price: $1.4418
Support 1: $1.4310
Support 2: $1.4200
Support 3: $1.4120
Comments: EUR/USD rebounds Monday, getting close to channel resistance line from Jul 31 on $1.4511. Above the target comes at 23.6% Fibo on $1.4620 ($1.6030 - $1.4190 decline). Break above will open the way to $1.4760/70 (29 Aug high). Support comes at $1.4310 with stronger – around $1.4190/00 (Friday’s lows). Below losses may widen to $1.4120 (21 Oct 2007 low).

High Low Close
EUR/USD 1.4347 1.4194 1.4232
USD/JPY 107.34 105.51 107.19
GBP/USD 1.7744 1.7553 1.7637
USD/CHF 1.1185 1.1065 1.1173

EUR/JPY 153.32 150.53 152.59
EUR/GBP 0.8140 0.8052 0.8067
GBP/JPY 189.49 186.13 189.09
GBP/CHF 1.9723 1.9492 1.9709

Change % Change Last
Nikkei 225 -345.43 (-2.75%) 12212.23
Topix -30.81 (-2/6%) 1184.94
DAX 30 -152.13 (-2.42%) 6127.44
САС 40 -107.35 (-2.49%) 4196.66
FTSE 100 -121.40 (-2.26%) 5240.70
Dow +32.73 (+0.29%) 11220.96
Nasdaq -3.16 (-0.14%) 2255.88
S&P +5.48 (+0.44%) 1242.31
10YR 96 -21/32 3.7% 102 13/32
OIL NYMEX -1.66 (-1.54%) $106.23

08:30 UK PPI (Output) (August) unadjusted 0.1% 0.4%
08:30 UK PPI (Output) (August) unadjusted Y/Y - 10.2%
08:30 UK PPI Output ex FDT (August) adjusted - 0.3%
08:30 UK PPI Output ex FDT (August) unadjusted Y/Y - 6.7%
08:30 UK PPI (Input) (August) adjusted -1.2% -0.6%
08:30 UK PPI (Input) (August) unadjusted Y/Y - 30.1%
19:00 USA Consumer credit (July), bln +8.7 +14.0