Stevens Boosts AUD
The Australian dollar got a modest boost from parliamentary testimony by RBA Governor Stevens. He painted a relatively upbeat picture of the economy and, crucially, he did not suggest the RBA are poised to cut the cash rate imminently. Looking to external risks, he said that China is getting on top of its problems around inflation and the property market. However, he sounded more cautious on Europe noting anxiety over the sovereign debt crisis has not gone away entirely, nor will it for some time. Earlier, the euro also made some headway during the European session after a strong German IFO print. The other stand-out mover in the G10 space was EURNOK which broke below a key support level at 7.48. With approval in principle now granted for a new Greek aid program, and FX volatilities at multi-year lows, conditions look right for investors to add to risk positions for another week or so – especially in the run up to the LTRO on Feb. 29. However, we recommend staying nimble given questions remain over how smoothly the PSI transaction will proceed especially now that a credit event seems increasingly likely. Also we remain on guard for ratings actions over the coming weeks in response to the ECB’s acquisition of de facto super-senior status. Overnight EURUSD traded in a range 1.3231 – 1.3379, USDJPY 79.86-80.37.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank