The US dollar extended its recent losses overnight, falling against nearly all of its non-North American major counterparts. With the selloff in global equities slowing, despite continued unrest throughout Northern Africa and the Middle East, investors appear to be focusing on skyrocketing crude oil prices. Although Libya, the current hotspot for violent protests, is a major oil exporter and OPEC member, any potential slack in supply would be easily made up for by other oil producers. Investors appear to be more intently focused on the tiny Persian Gulf nation of Bahrain, where recent protests turned deadly. The island nation is home to a number of international businesses' Middle East operations, but more importantly, borders Saudi Arabia's oil-rich Eastern region. If the recent turmoil were to spill over into to the world's largest oil exporter, the 9% jump in crude oil due to the Libyan unrest would likely only be a precursor to an even higher spike in commodity prices. The inevitably higher prices paid at the pump could stunt the fragile economic recovery in the US and Western Europe.

US Existing home sales bested forecasts this morning, registering 5.36M, up from 5.28M last month, and better than the 5.22M expected. While the pace of gains month over month is slowing, the housing market appears resilient as conditions in the labor market slowly improve. Weekly jobless claims will be closely watched tomorrow, with the measure expected to extend its recent declines.

The EUR rose to a three-week high against the USD overnight as investors price in higher interest rates in the Eurozone. ECB member, Yves Mersch, told reporters earlier in the week that the ECB might adjust its monetary policy to address the inflation and debt problem, suggesting that higher rates may be soon to come. However, the common currency's upside remains limited by continued disparity amongst Eurozone members. While Germany and France's economies show signs of steady growth, the region's periphery economies continue to struggle. Protests in Greece over the retirement age and wages turned violent this morning and data out of Portugal, Ireland and Spain continue to underwhelm. However, broad dollar weakness from higher commodity prices and growing expectations of higher rates in the Eurozone will provide significant support for the EUR in the near term.

Sterling also neared a monthly high against the USD as minutes from the BoE's February meeting showed that the pro-rate hike camp found a new supporter. Policymaker Spencer Dale joined both Andrew Sentance and Martin Weale in voting to tighten policy. Calls to raise rates for the first time since July of 2007 have intensified as inflation remains above the BoE's two-percent target. Records showed that Dale and Weale both voted for a 25 basis-point hike, while Sentance called for a more aggressive 0.50% hike. The minutes also showed that of the five members that voted for no increase in the benchmark rate some thought that the case for an increase had nevertheless grown in strength. However, sterling has encountered resistance as it nears its 2010 highs, and BoE Governor, Mervyn King, insists that the market's expectations for higher rates are overdone.

Commodity currencies are mixed this morning with the CAD, MXN and NZD falling, while the AUD and ZAR move higher. The loonie and peso have both shed roughly a half of a percent this morning as investors fear that skyrocketing oil prices due to continued unrest in the Middle East, will hinder growth in both Canada and Mexico's main trading partner, the United States. The kiwi remains under pressure as initial estimates are pricing the recovery from the recent devastating earthquake on New Zealand's South island at $8B. The AUD and ZAR however, have moved higher in tandem with rising commodity prices with higher oil prices posing less of a threat to growth in their primary trading partner, China. All bets on currencies from major commodity exporters will however remain tempered by weaker global risk appetite with the continued uncertainty over demonstrations in North Africa in the Middle East.




























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This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.