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Asian equities are broadly higher following the strong close in the US last week with
the DOW Jones hitting another record high. The Dollar stays firm against other major
currencies but is stuck in tight range so far. A main focus today is on whether risk
rallies will take US Dollar Japanese Yen higher after taking out the 95 psychological level
last week. Bank of Japan governor nominee Kuroda signaled that the central bank will
quickly pursue aggressive easing after he's confirmed. He noted that the current scale
of quantitative easing is "not a strong enough commitment to quickly achieve the 2 percent
inflation target." And he said that the Bank of Japan will "carefully consider" the proposal
of buying derivatives.
The Euro is still struggling around the 1.3 psychological level against the US dollar
for the moment but it looks vulnerable. EU leaders will meet again later this week in
Brussels on the bailout terms for Cyprus. IMF chief Lagarde noted that there is a need
for Cyprus to address debt sustainability with a path to return to market and eventually
growth. German Finance Minister Schaeuble also commented that there is a "complicated
situation" in Cyprus. In Italy, president Napolitano is so far avoiding to call a new
election and said that he may consider a national-unity government and accept a minority cabinet under
Bersani. Fitch said last week that "the increased political uncertainty and non-conducive backdrop
for further structural reform measures constitute a further adverse shock to the real economy
amidst the deep recession," and warned that "the ongoing recession in Italy is one of
the deepest concerns in Europe."
Latest CFTC data show a further deterioration in positioning in most major currencies in
the week to March 5th, including the Euro, Sterling, Australian Dollar and Canadian Dollar.
Euro net shorts rose to 26,100, up from 9,000, that's sharp deterioration from the 38,000
net longs back in early February. Yen net shorts rose slightly to 73,400 up from 65,300.
Sterling net shorts rose to 43,800, up from 36.100: the seventh straight week of deterioration.
And note that the best positioning in the last 12 months was 37,300 net longs back in
December. Aussie net longs dropped to just 7,100 contracts compared to 208,800 net longs
back in January. That’s the sixth straight week of deterioration. Further deterioration
will turn Aussie into net short territory. Canadian dollar net shorts rose for another
week to 46,700, up from 21,000: confirming a seventh straight week of deterioration.
Manufacturing Production in the UK and Federal Budget Balance in the US are the main events
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