USD – The US dollar is stronger against most major currencies despite little major data due today and meager data from the home building sector. US home‐builder confidence for single family homes eased slightly in February from last month's seven‐year high. However, the dollar holds solid as consumers were a bit more upbeat early this month, even as they paid more for gasoline and saw an increase in taxes. In further support for
the greenback was production data in November and December which were much stronger than expected. In addition, the "Empire State" general business conditions index rose to 10.0 from ‐7.8 the month before. February's index showed the first growth in the sector since July and the best
performance since May 2012. The rebound was driven by new orders, which hit their highest level since May 2011. As headline data remains limited this week, the market will extend its focus to tomorrow's FOMC minutes.

EUR – The euro was supported today by positive data from Germany but pending  elections in Italy this weekend kept the currency in check. The single currency rose to the upper bounds of recent narrow ranges to $1.3373 after German investor morale rose to near 3‐year highs. The ZEW index of investor sentiment rose to 48.2 in February from 31.5 previously, well surpassing forecasts of 35. The report along with other recent positive data suggested that Germany was emerging from its recent slowdown. Euro gains, however, were tempered ahead of the elections in Italy where an upset win by former Premier Berlusconi could cast doubt over recent economic austerity measures. The G20 summit of finance leaders concluded in Moscow over the weekend without an official statement on exchange rates. The recent rise in the euro amid rapid yen depreciation came in response to charges of currency manipulation by several European leaders, and prompted the G7 to issue a statement last week in support of market determined exchange rates.

GBP – Sterling is up slightly this morning after reaching a six‐month low of 1.5438 yesterday. The combination of a weak currency and rising gilt yields suggests that the market is increasingly pricing in the risks of the BoE’s policy of tolerating above target inflation while maintaining loose policy. The question now is what policy and opinion Mark Carney will bring to the MPC. The BoE minutes will be released tomorrow, shedding
some light on what transpired at the BoE meetings that were held on Feb 6‐7.

JPY – The Japanese yen strengthened gaining 0.4% since yesterday’s close, but remained flat since Friday after the G20 policymakers failed to release a statement singling out Japan for its actions to devalue its currency. Further supporting the yen was the release by S&P that affirmed Japan’s AA‐ rating, citing a strong external profile and a sound financial system, however, also noting a weak policy foundation, fiscal deficits, high debt levels, and further risks surrounding the upcoming election in July. Japanese Finance Minister Taro Aso stated that the government
would not be purchasing foreign bonds as part of its monetary easing platform. This announcement came after the BoJ released minutes of its previous policy meeting, at which the central bank reiterated its commitment to eliminate deflation. The market will turn its attention to Prime
Minister’s Abe’s decision over electing a new BoJ governor, where candidate Toshiro Muto is favored, and seen as affecting a bearish outlook on the yen.

Commodity Currencies – The Australian dollar is weaker against the US dollar as markets pare back expectations for an RBA rate cut after the less dovish than expected minutes were released. The USD/CAD is also weaker, as the fall‐out from Friday's lower than expected Canadian manufacturing sales data pushed the pair to a seven‐month high at 1.0125. In addition, Statistics Canada reported wholesale trade shrank more than expected in December. Wholesale trade was down 0.9% by volume and inventories fell 0.6%. The data is the latest sign the economy is slowing, adding pressure on the government as it seeks to find balance between spending cuts and growth measures.

RMB – After last week’s Lunar New Year holiday, the yuan closed slightly lower with the PBoC setting its daily midpoint at a weaker level, trying to stem the Chinese currency from appreciating as other Asian currencies continue their decline. Spot yuan (CNY) came in at 6.2443 per dollar, down 0.03 percent from 6.2427 seen yesterday. PBOC set the yuan's midpoint at 6.2821, five pips weaker than yesterday’s level. The offshore yuan (CNH) traded in Hong Kong remained at a premium compared to its onshore counterpart. Most of the yuan appreciation seen the last quarter of 2012 has reversed. Look, however, for PBOC to see further opportunities to allow the currency to strengthen later in the year as the economic outlook for China is further cemented with strong data. In other news, Taiwan announced that it will sell its first Offshore Chinese yuan‐denominated bond, following Hong Kong, as the cities compete for business in a currency that is moving toward convertibility and full internationalization.

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