Sticking With The Dollar
Softer than expected data, weaker equity markets and lower commodity prices have all served to underpin the US dollar, which has managed to shrug off the ‘Bernanke effect’. The downward revision to UK Q4 GDP (-0.3% q/q) and modest bounce in US February durable goods orders (+2.2% m/m) were the latest data disappointments for the market, though the latter should accelerate in coming months. Though any USDJPY dip will undoubtedly spawn repatriation talk ahead of the book closing in Japan, such flows are unlikely to figure prominently. The Japanese have been net foreign bond buyers in 9 of the 11 weeks through March 17 to the cumulative tune of JPY5.2 trn. The latest weekly data will be released this morning, and are unlikely to alter the basic picture. We still expect the ‘home currency bias’ of yield-hungry Japanese investors to fade further once the new fiscal year kicks off next week, tilting yen risks to the weaker side. As always, much will hinge on the data flow to the extent it remains sufficiently robust to keep the Fed on hold – as we expect. Jobless claims will be the key US data attraction today. UBS expects a 350k print, pulling the four-week average down a notch to 354k – below the 383k level at the start of this year. The revised Q4 US GDP figures will be of less interest, but the UBS forecast pegs a growth upgrade to a 3.3% annual rate from 3.0% on stronger retail sales revisions and quarterly services survey data on hospital spending. Bernanke will continue his college lecture series today, and one should also keep an eye on Fed speeches from Lacker, Lockhart and Plosser.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank