USD/TWD ends down

USD/TWD ends down at 33.820 vs last close at 33.888, tracking weaker USD/KRW, gains in local stocks, foreign funds inflows, but pair ends off lows on suspected central bank support, says local bank trader, adds market's reaction to rate decision in central bank's quarterly policy meeting (due shortly) will likely be muted;  "whether they cut rates or not, the result is the same, market rates are near zero." Exporters' USD selling to cap any USD gains above 33.850 tomorrow, support tipped at 33.750.

Despite weak demand

Despite weak demand on the $34 bln five-year note sales that spurred broad-selling in Tsys Wednesday afternoon, it doesnt mean US auctions will be poor going forward. It may actually bolster demand for Thursday's $24 bln seven-year note sales because investors who bid on the 5-yr auction may sell the note to buy seven-year notes, says Jeff Feigenwinter, head of Treasury trading at BNP Paribas. With the Fed bond buying program in place, 10-year note's yield will be capped below 3% in the short term, he says

UBS says its new equity flows

UBS says its new equity flows model for currencies suggests going long CHF/SEK. The trade will be held for the next three days with no stop losses and no taking profits. The model looks at cross-border equity flows from the bank's clients and follows or fades the currency crosses - a strategy with 8% annual returns over the past seven years. Trade was entered at 7.1651. Pair is now at 7.1721.

The euro hit a five-month high against the yen

The euro hit a five-month high against the yen in Asia Monday as players' risk appetite recovered on a U.S. plan to remove banks' toxic assets from their books.   A Wall Street Journal report during the weekend on the so-called "bad bank" plan raised appetite for riskier currencies such as the euro, sending it to Y131.97, the highest since Oct. 21, dealers said. Although it lost some of its gains later in the day, it remained substantially higher compared with New York's Friday closing of Y130.15.   Attention now shifts to details of the plan, expected to be announced by Treasury Secretary Timothy Geithner at around 1245 GMT, especially over the purchase price and speed of clearing toxic assets, traders said.   "A positive surprise (about the plan) could bolster sentiment (further) and lift" riskier currencies, said Tsutomu Soma, a senior trader at Okasan Securities.   But "if the plan lacks fresh factors, that will be negative for" those currencies, said Saburo Matsumoto, a senior foreign exchange manager at Sumitomo Trust and Banking.   The euro also got a boost from higher Japanese stocks, with the benchmark Nikkei 225 Average up more than 3% midday, which prompted non-Japanese short-term investors to buy the riskier currencies with yen, traders said.   Meanwhile, the single currency rose about one cent versus the dollar to a high of $1.3685.   Traders say the European currency could rise to Y135.00 this week as the area's higher interest rates, compared with those of the U.S. and Japan, may encourage investors to purchase the currency.   The dollar, meanwhile, rose versus the yen to Y96.16, compared with Y95.90 in New York Friday.   The U.S. unit rallied versus the yen because investors bought the pair to take advantage of the dollar's dive last week to as low as Y93.55, traders said.   However, the U.S. unit faces risks of falling against the Japanese currency, possibly to Y93.50, its lowest in a month, dealers said. If the U.S. long-term interest rate keeps falling due to the Federal Reserve's monetary easing announcement last week, players may start dumping the currency because of narrowing U.S.-Japan interest rate differentials, they said.   The yen may also be supported by Japanese institutional investors, dealers said, because they will likely bring substantial profits earned on overseas assets home toward the March 31 fiscal-year end.   Traders are also focused on U.S. existing home sales data for February, due at 1400 GMT.

yuan slightly lower against the U.S. currency

A higher central parity rate and the dollar's gains in Asia pushed the yuan slightly lower against the U.S. currency Monday.   Dealers said the yuan is likely to keep consolidating between CNY6.8340 and CNY6.8420 in coming sessions in the absence of trading cues.   On the over-the-counter market, the dollar was at CNY6.8386, up from Friday's close of CNY6.8380. It traded between CNY6.8377 and CNY6.8389.   The dollar-yuan central parity rate was set at 6.8349, up from 6.8334 Friday.   "Investors are still worrying about the domestic economy after China released the February economic data last week," said a Shanghai-based dealer at a foreign bank.   "Due to weaker external demand, there is also decreasing need for companies to settle accounts," which leads to a drop in demand for the local currency, she added.   China's February exports fell 25.7% from a year earlier to US$64.9 billion, and imports dropped 24.1% to US$60.1 billion. In addition, the country's industrial production growth also weakened last month while consumer prices fell for the first time in over six years, raising concerns of deflation.   At 0820 GMT, the dollar was at Y98..17, up from Y98.06 late Friday in New York.   Despite Monday's higher parity rate, the market expects the yuan to stay in a tight range against the dollar.   "The market is expected to stay calm in the following sessions as China reiterated its steady yuan policy and failed to release any new stimulus measures during the National People's Congress last week," said a Shanghai-based dealer at a foreign bank.   Commerce Ministry spokesman Yao Jian said Monday "the yuan's exchange rate has remained basically stable recently and will have an important bearing on facilitating global economic recovery and the stabilization of China's foreign trade environment."

This revisit of EUR/CHF

This revisit of EUR/CHF notes that the euro is near a potential interim top. It's trading now near the intraday high of CHF1.5406, and so is crowding long-term target resistance at CHF1.5430 resistance. Intraday longs should be stopped now at CHF1.5370. A decisive move above CHF1.5430 would be going for initial resistance in the CHF1.5456-CHF1.5463 band. If trades are stopped below CHF1.5370 expect a dip to CHF1.5337.

The SEK's recent resilience

The SEK's recent resilience won't last much longer, according to Forex Focus column by Nicholas Hastings. Falling equity markets, worries about the Baltic States as well as more bad economic news out of the Sweden will eat away at the support the currency had been getting in recent weeks.

Most Asian markets ended lower

Most Asian markets ended lower Thursday, giving up gains from the previous session, as concerns about the global economy persisted.

Japanese stocks fell sharply, with exporters hit especially hard as the yen strengthened against major currencies. Japanese banks also declined, reversing gains from the previous day, although in Sydney, National Australia Bank led the advance among financials after delivering its strategy report.

"There's more negative sentiment out there. Although a lot of things are good, we haven't reached a point where we've actually resolved the problem within the banking system," said Andrew Sullivan, a trader at Main First Securities.

Japan's Nikkei 225 finished down 2.4% after Wednesday's 4.6% surge. China's Shanghai Composite dropped 0.2%, Taiwan's Taiex slipped 0.1% and New Zealand's NZX 50 fell 0.2%. Australia's S&P/ASX 200 slipped 0.3%.

"People want a clearer picture on the economic outlook before they commit to the market," said Singapore-based Westcomb research head Goh Mou Lih.

South Korea's Kospi Composite ended up 0.1%, ignoring the South Korean won's weakness and the central bank's decision to leave interest rates unchanged, belying expectations of a reduction. India's Sensex climbed 2.3%, ignoring weak data on industrial output, as easing inflation raised hopes of further monetary policy easing.

Hong Kong's Hang Seng Index ended up 0.6% at 12001.53, although the Hang Seng China Enterprises Index fell 0.7%, tracking the weakness in Shanghai.

"The pendulum has swung a bit toward the hope side rather than the fear side," said KGI Asia's Ben Kwong.

The focus Thursday was on data and events: In Japan, fresh data showed that the economy contracted slightly less than initially reported in the fourth quarter, with GDP down 3.2% from the previous quarter, or down 12.1% in annualized terms, compared with original estimates of a 3.3% on-quarter decline and annualized 12.7% contraction.

Still, the data confirmed a drop in exports which has battered the economy in recent months.

The Bank of Korea opted to keep interest rates at an all-time low 2.0% after six consecutive cuts in the past four months. The decision was a surprise as most economists polled by Dow Jones had expected further easing.

Malaysia's larger-than-expected stimulus package

Malaysia's larger-than-expected stimulus package suggests government might move less on monetary policy going forward, says UOB; notes BNM's cut policy rate 150 bps since November, UOB expects another 25 bp cut to 1.75% by end 2Q09, keeping in mind BNM governor Zeti's comment that central bank has front-loaded its interest rate cuts and that it's not constructive to keep interest rates low, which appear to be targeted at dampening rate cut expectation. Says pressure for MYR to fall remain, giving weak growth prospects, likely pushing USD/MYR to 3.75 over next few weeks. But "we see a rebound in ringgit towards 3.55 per dollar by the year-end on the assumption of the bottoming-out of the economy."  USD/MYR last at 3.6875.

EUR/USD has overcome hourly trendline resistance

EUR/USD has overcome hourly trendline resistance at 1.2675 but found some resistance ahead of the next barrier at 1.2725 notes BNP Paribas. Above here the bullish point is 1.2750 with a break arguing for a rise toward 1.29. The bank adds that a daily close above 1.27 points the rate in the direction of 1.32. EUR/USD now at 1.2713.

Zloty is weaker

Zloty is weaker, following regional peers on sustained risk aversion, dealers say. EUR/PLN trades at 4.7246 from 4.6976 late Friday, USD/PLN at 3.7463 from 3.6950. Treasury bonds are little changed, the market awaits the results of auctions of 26 and 52-week T-Bills later Monday. Average yield on 2-year paper unchanged at 5.72%, on 5-year is at 6.08% versus 6.09% late Friday, on 10-year at 6.40% vs 6.38%.

USD/CAD is ending lower

USD/CAD is ending lower, around C$1.2900, but well above its C$1.2765 low, as stocks proved unable to maintain early strength. There were no significant data releases in Canada. Domestic jobs data for Feb will be released next Fri.