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Today's Markets

March 31, 2010
The combination of a negative surprise from ADP, a disappointing Chicago PMI and talk of MSCI rejig has encouraged the market to extend the short-covering rally in the euro, sterling and Swiss francs. With the fiscal year end repatriation completed, the yen has been under pressure and remains so today. Full liquidity will not return to the foreign…
Today's Markets Today's Markets Reviewed by Marc Chandler on March 31, 2010 Rating: 5
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Dollar's Share of Reserves Rises, More to Come

March 31, 2010
The most authoritative source of information about the currency allocation of fx reserves, the IMF's COFER data, was just released for Q4 09. As we have suggested, based on the dollar's appreciation, the greenback's share of reserves increased. In Q4 the dollar's share of allocated reserves rose to 62.1% from 61.5%.
The euro's s…
Dollar's Share of Reserves Rises, More to Come Dollar's Share of Reserves Rises, More to Come Reviewed by Marc Chandler on March 31, 2010 Rating: 5
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Brazil and Mexico Update

March 31, 2010
Brazil will report is Feb nominal and primary budget balances today. While this report typically does not more the Brazilian market, the risk is that it does today and in disappointment. Late yesterday, it was reported that the central government balance deteriorated to BRL1.09 bln deficit compared with expectations for a BRL1.23 bln surplus. In i…
Brazil and Mexico Update Brazil and Mexico Update Reviewed by Marc Chandler on March 31, 2010 Rating: 5
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Sterling's March: In like a Lion out Like a Lamb

March 31, 2010
Official had hoped that last week’s EU/IMF deal on Greece would have put the issue to rest for a little bit, but it hasn’t. Month-end considerations appear to be offsetting the impact on the euro. Mediocre to weak demand for Greek bonds this week has resulted in widening premium Greece is being forced to pay. While the Greek government indicates t…
Sterling's March: In like a Lion out Like a Lamb Sterling's March: In like a Lion out Like a Lamb Reviewed by magonomics on March 31, 2010 Rating: 5
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Germany: It is Not Our Fault

March 30, 2010
The Greek fiscal problems have morphed into a larger structural issue for Europe. Germany itself has come under criticism by some euro-zone members including France, over its export reliance, its sluggish domestic economy and its stingy wage policy. Germany is responding to these criticisms.
First, it note that it has provided 90 bln euros of fisc…
Germany: It is Not Our Fault Germany: It is Not Our Fault Reviewed by Marc Chandler on March 30, 2010 Rating: 5
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China Update

March 30, 2010
The results of the Pew Survey, recently cited in the Financial Times, captures the essence of the tension between the US and China. The survey found that a majority of American believe the Chinese economy is larger than the US economy. Not only is that patently untrue, but it is not even a close call. The US economy is more than three times as big…
China Update China Update Reviewed by Marc Chandler on March 30, 2010 Rating: 5
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Consolidative Tone Emerges

March 30, 2010
There are some observers who are suggesting that the negative swap rates in the US (from fixed to floating) is undermining the dollar just as it undermined sterling. This seems mistaken. The strongest major currency against the dollar over the past five sessions has been sterling. But even more to the point, the dollar’s recent pullback, like its …
Consolidative Tone Emerges Consolidative Tone Emerges Reviewed by magonomics on March 30, 2010 Rating: 5
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Canadian Dollar Bid Ahead of Jenkins

March 29, 2010
The Canadian dollar is well bid in the weak US dollar environment. Higher oil price and firmer commodity prices in general are thought to be lending support as well. The Bank of Canada's Jenkins speaks today near noon EST.
Gov Carney's hawkish comments last week seemed to signal the liklihood of a rate hike in June or July. Core inflation,…
Canadian Dollar Bid Ahead of Jenkins Canadian Dollar Bid Ahead of Jenkins Reviewed by Marc Chandler on March 29, 2010 Rating: 5
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German CPI Higher Than Expected, but Bunds Still Draw Bid

March 29, 2010
German March inflation surprised to the upside. The 0.5% rise in March translates into a 1.1% year-over-year rate (EU harmonized measure 1.3%) This is the highest since Nov 2008. It appears, in part, to reflect higher energy and commodity prices, which in turn could be reflecting in part the euro's pullback in recent months. The increase in fo…
German CPI Higher Than Expected, but Bunds Still Draw Bid German CPI Higher Than Expected, but Bunds Still Draw Bid Reviewed by Marc Chandler on March 29, 2010 Rating: 5
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Dollar Under Pressure at Start of the Week

March 29, 2010
The foreign exchange market has responded to the EU/IMF deal by reducing short euro positions. The latest IMM data showed that as of as of last Tuesday, March 23rd, the next speculative position was record short euros. The short-covering rally began before the weekend, with the euro recording a fresh low for the move just below $1.3270. The rally …
Dollar Under Pressure at Start of the Week Dollar Under Pressure at Start of the Week Reviewed by Marc Chandler on March 29, 2010 Rating: 5
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GDP Highlights

March 26, 2010
There has been little reaction to the final revisions of Q4 09 US GDP, though the North American market seems somewhat more dollar friendly than Europe was. The take away from Q4 GDP is a small downward revision in growth to 5.6% from 5.9% and a small upward revision to inflation. The core PCE measure rose 1.8% compared with 1.6% of the prior esti…
GDP Highlights GDP Highlights Reviewed by Marc Chandler on March 26, 2010 Rating: 5
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Ode to Mrs Watanabe

March 26, 2010
New Year: Return of the Old Yen A new fiscal year is about to begin for Japan. The yen is likely to depreciate in the year ahead. The driving force may not be a further reduction in risk aversion, though the appetite for risk may remain robust. It is unlikely to be a result of intervention, though given the deflationary conditions and the internec…
Ode to Mrs Watanabe Ode to Mrs Watanabe Reviewed by Marc Chandler on March 26, 2010 Rating: 5
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Foreign Currencies Mostly Higher on Short-Covering

March 26, 2010
The US dollar is broadly lower, though mostly within yesterday’s trading ranges, as the market adjusts positions in light of the European agreement on support for Greece. This is the main market development. However, it does not appear sufficient to really reverse the negative sentiment toward the euro. Resistance in the $1.3425-50 area needs to b…
Foreign Currencies Mostly Higher on Short-Covering Foreign Currencies Mostly Higher on Short-Covering Reviewed by Marc Chandler on March 26, 2010 Rating: 5
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What Does Greece Want and What's It Going to Get

March 25, 2010
Greek Prime Minister Papandreou has been arguing that Greece is not asking for material aid, but rather some kind of convincing support that would lower the yield that it must pay. He has supported the European Socialist call for an EMU fund that lends to Greece (and ostensibly others if/when needed as well).
Papandreou may not get exactly what he…
What Does Greece Want and What's It Going to Get What Does Greece Want and What's It Going to Get Reviewed by Marc Chandler on March 25, 2010 Rating: 5
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Shifting Currency/Equity Market Relationships

March 25, 2010
The risk-on/risk-off driver seemed to characterize in many ways during the financial crisis and its immediate aftermath. One of our thematic points is that this relationship is breaking down. In this context we re-examined the correlations between the euro/dollar and dollar/yen exchange rage and the S&P 500.
Recall that in terms of methodology…
Shifting Currency/Equity Market Relationships Shifting Currency/Equity Market Relationships Reviewed by Marc Chandler on March 25, 2010 Rating: 5
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South Africa Surprises with a 50 bp Cut

March 25, 2010
South Africa's central bank surprised the market with a 50 bp rate cut that brings the key repo rate to 6.5%. A Bloomberg survey found only 2 of 24 surveyed expected a cut. While we had recognized the risk of a cut, news yesterday that Feb inflation was in line with expectations (5.7% year-over-year vs 6.2% in Jan) and still at the upper end o…
South Africa Surprises with a 50 bp Cut South Africa Surprises with a 50 bp Cut Reviewed by Marc Chandler on March 25, 2010 Rating: 5
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Dollar Consolidates

March 25, 2010
The US dollar is consolidating yesterday’s outsized gains. Profit-taking appears largely minimal, though sterling did receive a boost by the much stronger than expected February retail sales report (2.1% vs consensus of 0.7%). However, the market quickly appreciated the weather distortions and the January series was revised sharply lower (from -1.…
Dollar Consolidates Dollar Consolidates Reviewed by Marc Chandler on March 25, 2010 Rating: 5
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UK Budget Down and Dirty

March 24, 2010
UK gilts and the British pound have suffered in the wake of the Darling's budget presentation. The UK faces a difficult situation and sterling weakness is the path of least resistance.
Even though Darling forecast a lower borrowing need, the Debt Management Office suggested somewhat greater supply than expected (GBP187.3 bln vs this year's…
UK Budget Down and Dirty UK Budget Down and Dirty Reviewed by Marc Chandler on March 24, 2010 Rating: 5
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Norges Bank Stands Pat, Pushes Out Hike, NOK Lower

March 24, 2010
In what was thought to be a close call the Norwegian central bank left rates unchanged at 1.75%. In its guidance it makes it seem like it was not that close of a call after all, noting that some industries are still contracting and revised up its forecast for unemployment for next year (3.75% vs 3.5%).It also noted that underlying inflation was sl…
Norges Bank Stands Pat, Pushes Out Hike, NOK Lower Norges Bank Stands Pat, Pushes Out Hike, NOK Lower Reviewed by Marc Chandler on March 24, 2010 Rating: 5
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EM Highlights

March 24, 2010
My earlier post focused on European developments, which are driving the markets today. At the same time, there are several noteworthy emerging market developments.
1. Taiwan central bank meets tomorrow. The key 10-day loan rate is likely to remain at 1.25%, but there is a risk that it hikes reserve requirements in the coming weeks. The country rep…
EM Highlights EM Highlights Reviewed by Marc Chandler on March 24, 2010 Rating: 5
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Dollar Rides High

March 24, 2010
The US dollar is riding high today, with broad based gains against the major currencies and enjoying a firmer tone against most emerging market currencies. Even stronger than expected European PMI reports and a better German IFO survey failed to lend the euro much support. The single currency has been pushed to new 10-month lows and took out the l…
Dollar Rides High Dollar Rides High Reviewed by Marc Chandler on March 24, 2010 Rating: 5
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Rand Shrugs off C/A Improvement

March 23, 2010
Earlier today South Africa reported a smaller than expected Q4 current account deficit. At 2.8% of GDP, it is the smallest in about 4 1/2 years.
South Africa's current account deficit peaked in 2008 just above 7% of GDP. For all of last year it was 4%. A combination of increased trade volumes and higher prices account for the narrower shortfal…
Rand Shrugs off C/A Improvement Rand Shrugs off C/A Improvement Reviewed by Marc Chandler on March 23, 2010 Rating: 5
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The US 2-year Yield Soon to Rise Above Germany

March 23, 2010
In our explanatory models of the dollar's movement, we tend to place greater weight on interest rate differentials, shapes of curves, etc than external imbalances per se.
During this crisis US rates fell well below Germany, the proxy for the euro zone. Just like we argue the dollar's bottom is a process and it often happens as a cascade ef…
The US 2-year Yield Soon to Rise Above Germany The US 2-year Yield Soon to Rise Above Germany Reviewed by Marc Chandler on March 23, 2010 Rating: 5
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What FedEx Earnings Say About the Global Recovery

March 23, 2010
At the end of last week Federal Express reported Q3 earnings. Rarely are corporate earnings reviewed closely by currency strategists, but this report seems to shed light on the global economic recovery.
Fedex, like others in this space, typically do well in the beginning of economic recoveries. Its quarterly profit more than doubled due to a stron…
What FedEx Earnings Say About the Global Recovery What FedEx Earnings Say About the Global Recovery Reviewed by Marc Chandler on March 23, 2010 Rating: 5
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Tuesday's FX Color

March 23, 2010
The US dollar is firmer, but still stuck in trading ranges, even if the edges have frayed a bit. Many observers will attribute the greenback’s gains to continued tension in Europe over Greece, but Greek bond yields have fallen today. Sterling is under pressure too, giving back more than half of yesterday’s gains. Margin new lows, just below $1.50 …
Tuesday's FX Color Tuesday's FX Color Reviewed by Marc Chandler on March 23, 2010 Rating: 5
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UK Reports Inflation Tuesday

March 22, 2010
The UK reports Feb inflation numbers tomorrow. After the Feb release of Jan figures, BOE's King had to write a letter to Chancellor Darling to explain the overshoot.
King explained that the inflation was due to temporary factors and that over time it will ebb due to the abundant slack in the economy. The data, including surveys, have generally…
UK Reports Inflation Tuesday UK Reports Inflation Tuesday Reviewed by Marc Chandler on March 22, 2010 Rating: 5
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Greece Update

March 22, 2010
The euro is bouncing back as the from its stop-loss triggered move to $1.3463. Perhaps it has been helped by a more resilient than expected US equity market. The euro's low of $1.3436 seen earlier this month appears safe at the moment, though the market does not appear finished for anything for the nearest of tenors. A move above $1.3520 would…
Greece Update Greece Update Reviewed by Marc Chandler on March 22, 2010 Rating: 5
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When Japan Returns

March 22, 2010
Japan's markets were closed Monday to celebrate the spring equinox. There are a number of economic reports that will be featured in the last full week of the fiscal year.
First thing on Tuesday, the BOJ will publish the minutes for its Feb meeting. Given that at the March meeting, the BOJ doubled the size of its 3-month fixed rate lending faci…
When Japan Returns When Japan Returns Reviewed by Marc Chandler on March 22, 2010 Rating: 5
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Monday Morning Quarterback

March 22, 2010
There are several developments in the foreign exchange market that are worth reviewing at the start of the week. The US dollar’s underlying tone remains firm after recovering in the second half of last week. Ahead of the EU Summit, Europe seems divided. Germany’s Merkel is keen to dampen expectations that the summit will agree on an aid package fo…
Monday Morning Quarterback Monday Morning Quarterback Reviewed by Marc Chandler on March 22, 2010 Rating: 5
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Surprise, India Hikes; More to Come

March 19, 2010
India surprised the market by announcing a 25 bp hike in key rates today. This brings the repo rate to 5% and the reverse repo rate to 3.5% To the extent there was speculation of a rate hike, it was more about China than India. That said, India had raised reserve requirement earlier this quarter and many understood a rate hike was a question of ti…
Surprise, India Hikes; More to Come Surprise, India Hikes; More to Come Reviewed by Marc Chandler on March 19, 2010 Rating: 5
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Thoughts on Euro, Sterling and Yen

March 19, 2010
Euro: When the range breaks it could really break. The euro has again frustrated the bottom pickers and the perma-dollar bears. It is has again been turned back after flirting with the upper end of its month long trading range. This time it was concern that Europe appeared increasingly divided over whether there should be a regional solution or sho…
Thoughts on Euro, Sterling and Yen Thoughts on Euro, Sterling and Yen Reviewed by Marc Chandler on March 19, 2010 Rating: 5
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Mexico: Central Bank Meeting Overshadowed

March 19, 2010
Mexico's central bank meets today. No change in the 4.5% policy rate is likely. The economy is just emerging from the worst recession in modern times, with a 6.5% contraction last year. Price pressures are rising, but the increase from 4.46% in January to 4.83% in February appears to largely reflect increases in administered prices, like gasol…
Mexico: Central Bank Meeting Overshadowed Mexico: Central Bank Meeting Overshadowed Reviewed by Marc Chandler on March 19, 2010 Rating: 5
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No Discount Rate Hike, but Another is Coming

March 18, 2010
Speculation swept NY on Thursday that the Fed could raise the discount rate. We were unconvinced and sure enough no discount rate hike was delivered. However, a discount rate hike before the end of the month cannot be ruled out.
On Feb 18th the Fed hiked the discount rate by 25 bp to 75 bp. Perhaps because it was the month anniversary some chins s…
No Discount Rate Hike, but Another is Coming No Discount Rate Hike, but Another is Coming Reviewed by Marc Chandler on March 18, 2010 Rating: 5
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Swiss Franc Stealing the Show

March 18, 2010
In a session primarily marked by 1) talk of fissure in Europe over IMF aid for Greece,and 2) speculation of a Fed discount rate, the Swiss franc is threatening to steal the show in the otherwise quiet NY afternoon.
The Swiss franc is posting dramatic gains, ostensibly on the back of SNB comments. New board member Jean Pierre Danthine is quoted on …
Swiss Franc Stealing the Show Swiss Franc Stealing the Show Reviewed by Marc Chandler on March 18, 2010 Rating: 5
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Color Me Skeptical about Discount Rate Hike Speculation

March 18, 2010
Speculation that the Federal Reserve is going to hike the discount rate today has weighed on the Treasury market and is helping to lift an already recovering US dollar in the foreign exchange market.
The speculation is likely to be for naught and this may leave the markets vulnerable to a reversal. The last discount rate hike was largely tipped b…
Color Me Skeptical about Discount Rate Hike Speculation Color Me Skeptical about Discount Rate Hike Speculation Reviewed by Marc Chandler on March 18, 2010 Rating: 5
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What's So Bad about the IMF Supporting Greece?

March 18, 2010
The markets have sold the euro in response to news that maybe the obstacles to a European initiative to aid Greece are too greater and maybe the IMF has a substantive role after all.

Although what appears to be a crack in the German government over the issue may have set the proverbial cat among the pigeons, Germany is not alone. Press reports su…
What's So Bad about the IMF Supporting Greece? What's So Bad about the IMF Supporting Greece? Reviewed by Marc Chandler on March 18, 2010 Rating: 5
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Implications of the Euro Zone's Current Account Deficit

March 18, 2010
The euro zone reported one of its largest monthly current account deficits on record. The 16.7 bln euro short fall in January compares with a 9.8 bln surplus in December. There seems to be a seasonal factor that makes the January shortfall typically large. In January 2009 the current account deficit was 19.9 bln euros and in January 2008 the defic…
Implications of the Euro Zone's Current Account Deficit Implications of the Euro Zone's Current Account Deficit Reviewed by Marc Chandler on March 18, 2010 Rating: 5
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Brazil Left Rates Steady, But April Hike More Likely

March 17, 2010
In what we thought was a close call, the central bank of Brazil left its overnight rate steady at 8.75%, a record low. The decision was made by a 5-3 majority. The dissenters wanted a 50 bp rate hike.
The closeness of the vote is a strong signal that barring a significant downside surprise over the next several weeks, Brazil's central bank will…
Brazil Left Rates Steady, But April Hike More Likely Brazil Left Rates Steady, But April Hike More Likely Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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Role for IMF After All?

March 17, 2010
News wires are reporting what could be a shift in the German position vis a vis Greece and the IMF. Until now, Germany had seemed to agree with other European officials-- including ECB's Trichet, Eurogroup's Junker, France's Sarkozy--that the IMF can provide technical advice, but this is a problem for the euro zone to resolve.
Role for IMF After All? Role for IMF After All? Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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Underlying Euro Weakness Evident on Crosses

March 17, 2010
The euro has once again been turned back from the upper end of its 4-5 week trading range against the dollar. The euro has been unable to make much head way despite a couple of favorable developments, including a relaxation of anxiety over Greece and the weaker credits in Europe, economic data that suggests a recovery is taking hold, and that the …
Underlying Euro Weakness Evident on Crosses Underlying Euro Weakness Evident on Crosses Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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Close Call on Brazil Today

March 17, 2010
Brazil's central bank meets today and surveys suggest the market is nearly evenly divided over the outlook. Strong growth and rising inflation and inflation expectations requires a rate hike and the issue is whether the central bank goes today or waits a month to lift the overnight Selic rate which currently stands at 8.75%.
Close Call on Brazil Today Close Call on Brazil Today Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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Healthy German Bund Auction, Little Support for Euro

March 17, 2010
Germany managed to draw a good reception to its 10-year bund auction. Despite a lower yield compared with last month, the bid-to-cover was higher and this despite the improvement in the performance of the weaker credits, which was supposed to erode the safe haven bid for bunds.
Today's auction produced an average yield of 3.13% compared with …
Healthy German Bund Auction, Little Support for Euro Healthy German Bund Auction, Little Support for Euro Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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BOJ Moves Reluctantly

March 17, 2010
The Bank of Japan left the key target rate unchanged at 10 bp, but appeared to bow to government pressure and increased the size of the three-month loan facility arranged last December to JPY20 trillion from JPY10 trillion.
Tweaking this facility was widely tipped as a likely compromise formation between the BOJ who has argued that monetary policy…
BOJ Moves Reluctantly BOJ Moves Reluctantly Reviewed by Marc Chandler on March 17, 2010 Rating: 5
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March 14, 2010
The FOMC meets this week. While slower perhaps than desirable, the Fed officials should be generally pleased with the trajectory of developments since they met last in late January. On the real economy side, Q4 09 turned out to be quite strong at 5.9% and the Q1 10 appears to be tracking something closer to 3%. Of course, Q4 was flattered by a lar…
Reviewed by Marc Chandler on March 14, 2010 Rating: 5
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Inventories and the US Economy

March 12, 2010
Business inventories were on the soft side. Not only was the Jan reading flat, but the Dec series was revised to -0.3% from -0.2%. Jan wholesale and factory inventories had previously been released so the new information today was largely the 0.1% decline in retail inventories.
Inventories added mightily to Q4 09 5.9% annualzed GDP and some what t…
Inventories and the US Economy Inventories and the US Economy Reviewed by Marc Chandler on March 12, 2010 Rating: 5
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Currency Confusion

March 12, 2010
The foreign exchange market is being accused of confusing the euro for the Greek drachma. Whereas many might be tempted to ignore the accusation, the fact that it was issued by the highly respected Martin Feldstein who is a Harvard professor, an official in the Reagan government and a member (and former chairman) of the NBER committee that is the …
Currency Confusion Currency Confusion Reviewed by Marc Chandler on March 12, 2010 Rating: 5
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Retail Sales Much Stronger than Expected

March 12, 2010
The February US retail sales data was much stronger than expected, even when taking into account the downward revisions in January. A picture of a broadening of the recovery is emerging. Looking at the Jan-Fed period combined, the headline rate rose a combined 0.4% and the market had expected a 0.3% increase, but the real strength is excluding aut…
Retail Sales Much Stronger than Expected Retail Sales Much Stronger than Expected Reviewed by Marc Chandler on March 12, 2010 Rating: 5
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Dollar Today

March 12, 2010
The US dollar's broad pullback is obscuring two otherwise noteworthy developments in Japan. First, both the prime minister and the finance minister made a none-too-thinly veiled threat of foreign exchange intervention.
Although one investment house was quoted on the wires late yesterday suggesting the odds of intervention stood at 47%, we susp…
Dollar Today Dollar Today Reviewed by Marc Chandler on March 12, 2010 Rating: 5
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If You Like the Greenback, You Might Like Canada More

March 11, 2010
Canada reported a larger than expected trade surplus earlier today. At C$0.8 bln, it was four times larger than expected and the December figures were revised to show a C$0.1 bln surplus instead of a C$0.2 bln deficit. Canada also reported a strong rise in Q4 capacity utilization rate to 70.9% from a revised 68.7% in Q3 (previously estimated at 67…
If You Like the Greenback, You Might Like Canada More If You Like the Greenback, You Might Like Canada More Reviewed by Marc Chandler on March 11, 2010 Rating: 5
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Is the Market Confusing the Euro with the Drachma?

March 11, 2010
Harvard Professor Martin Feldstein and member of the NBER committee that is the official arbiter of US recessions was on Bloomberg TV today suggesting that the the euro's decline this year was a reflecting of unjustified panic over Greece.

While of course the concerns about Greece and the lack of sufficient institutional capacity was a importan…
Is the Market Confusing the Euro with the Drachma? Is the Market Confusing the Euro with the Drachma? Reviewed by Marc Chandler on March 11, 2010 Rating: 5
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Turkey and IMF End Aid Talks

March 10, 2010
In a long engagement, Turkey and the IMF have been negotiating a stand-by package for well over a year. Today Turkey announced that there would be no marriage afterall--no deal. The impasse appeared to be over municipal expenditures. PM Erodogan's government had previously negotiated two programs with the IMF since coming to power in 2002.
Turkey and IMF End Aid Talks Turkey and IMF End Aid Talks Reviewed by Marc Chandler on March 10, 2010 Rating: 5
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ECB and Greece

March 10, 2010
Bundesbank President Weber has been the most candid to date about what the ECB could do in case Greece is downgraded again, especially by Moody's. Recall the problem: Prior to the crisis, the ECB would take as collateral only paper rated A- or better. During the crisis they have extended it to BBB-. It is due to revert back at the end of the y…
ECB and Greece ECB and Greece Reviewed by Marc Chandler on March 10, 2010 Rating: 5
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China

March 10, 2010
China reported stronger export and import figures for February than expected, with the net result of a smaller than expected trade surplus. In fact, February's trade surplus of $7.6 bln is the smallest in a year and a bit more than half of the January surplus. This is consistent, however, with an under-appreciated development that we think is …
China China Reviewed by Marc Chandler on March 10, 2010 Rating: 5
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Thoughts about Dollar's Share of Reserves

March 09, 2010
The IMF's COFER data is the most authoritative on the currency allocation of central bank reserves. It is updated at the end of every quarter for the preceding quarter. At the end of Dec 2009, Q3 data was released. At the end of this month, Q4 data will be published.

Recall that in Q3 09, the dollar's share of allocated reserves has slippe…
Thoughts about Dollar's Share of Reserves Thoughts about Dollar's Share of Reserves Reviewed by Marc Chandler on March 09, 2010 Rating: 5
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A Year in Stocks

March 09, 2010
The US stock markets bottomed on March 6, 2009. It is surprising to see what has really taken place over the past year. We looked at the performance in local currency terms to keep a cleaner read.

Among the G5 equity markets, the US S&P 500 was the clear winner advancing 68.4%. Both German's Dax and the UK's FTSE were up almost 60% (59.…
A Year in Stocks A Year in Stocks Reviewed by Marc Chandler on March 09, 2010 Rating: 5
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Pressure on Turkey

March 09, 2010
Along with other emerging market currencies, the Turkish lira is under pressure. In addition to broader risk aversion, Turkey-specific developments are also undermining the lira.

At the end of last week Turkey reported that CPI rose to 10.1% in February form 8.2% in January. This coupled with evidence that an economic recovery is gaining traction, …
Pressure on Turkey Pressure on Turkey Reviewed by Marc Chandler on March 09, 2010 Rating: 5
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Portugal Update

March 08, 2010
With the anxiety caused by the Greece situation alleviated for the time being by last week's successful auction, words of support from Germany and especially France over the weekend, and follow through gains in the Greek debt market, attention may turn elsewhere ahead of Greece's mid-March status report.
Portugal is the likely candidate a…
Portugal Update Portugal Update Reviewed by Marc Chandler on March 08, 2010 Rating: 5
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Favorable US Economic Data

March 08, 2010
The favorable news on the US economy extended beyond the jobs data before the weekend. We learned that consumer credit rose in January for the first time since Jan 2009. The $5 bln increase contrasts with expectations of a contraction of a similar magnitude. Some of the details, like an outsized surge in government student loans, seems unlikely to…
Favorable US Economic Data Favorable US Economic Data Reviewed by Marc Chandler on March 08, 2010 Rating: 5
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Yen Slumps

March 05, 2010
There are several factors weighing on the yen:
1. Speculation spurred by a unsourced story in an English version of a Japanese paper suggesting that the BOJ is considering additional monetary measures to combat deflation and lower yen borrowing costs. The BOJ seems to be under some pressure from the MOF to do more on this front. The BOJ's resp…
Yen Slumps Yen Slumps Reviewed by Marc Chandler on March 05, 2010 Rating: 5
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Germany: The Unnamed Co-Conspirator

March 05, 2010
For the better part of the past four months, Greece has been the center of the European maelstrom. It tried concealing the full magnitude of its deficits and debt for years. The proverbial chickens came home to roost when George Papandreou led the Socialists to electoral victory and when he went into the Treasury and found the cupboards were worse…
Germany: The Unnamed Co-Conspirator Germany: The Unnamed Co-Conspirator Reviewed by Marc Chandler on March 05, 2010 Rating: 5
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What's Up with Fed Funds ?

March 05, 2010
The Fed funds rate has been creeping up in recent days. At first, many dismissed it as a technical quirk. In early February, the effective Fed funds rate firmed to 14 bp as it did in early March. However it did not stop there and yesterday was at 16 bp. Dealers report a tight market and it also appears to be reflected in the OIS-1 month swaps.
Th…
What's Up with Fed Funds ? What's Up with Fed Funds ? Reviewed by Marc Chandler on March 05, 2010 Rating: 5
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Iceland Referendum--New Risks, Old Story

March 04, 2010
Officials have been trying to come up with some way to avoid the weekend referendum in Iceland but it looks likely those efforts have been in vain. Polls show that nearly three-quarters of the Iceland voters will reject the deal that parliament had approved that would pay the UK and the Netherlands 3.9 bln euros (~$5.3 bln) to reimburse the third …
Iceland Referendum--New Risks, Old Story Iceland Referendum--New Risks, Old Story Reviewed by Marc Chandler on March 04, 2010 Rating: 5
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CNBC: PIIGS Impact on the Dollar CNBC: PIIGS Impact on the Dollar Reviewed by magonomics on March 03, 2010 Rating: 5
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Greece Seeks to Save another 2% of GDP and Euro Yawns

March 03, 2010
As widely expected, Greece announced another package of savings, roughly split between tax hike and spending cuts, that projects to save another 4.8 bln euros, which is roughly 2% of GDP. The measures are harsh, but it is still too soon to expect Europe to provide anything but verbal support and solidarity. Nor can there be any money forthcoming f…
Greece Seeks to Save another 2% of GDP and Euro Yawns Greece Seeks to Save another 2% of GDP and Euro Yawns Reviewed by Marc Chandler on March 03, 2010 Rating: 5
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Greece Update: More Efforts before Assistance

March 02, 2010
Greek bonds are continuing to recover from the sell-off at the end of last week that took the 10-year yield to 6.65%. Now quoted near 6.12%, it is the lowest yield since Feb 11, down 14 bp today.
The key consideration is that Greece has 1) delayed the bond offering expected this week after being postponed last week and 2) indications that Greece wi…
Greece Update: More Efforts before Assistance Greece Update: More Efforts before Assistance Reviewed by Marc Chandler on March 02, 2010 Rating: 5
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Sterling Sell-Off but No Crisis

March 01, 2010
Sterling sold off hard on Monday and had a range (according to Bloomberg data) of $1.4784-$1.5209. While such a steep sell-off is rare, they do happen more often than many headline writers and market participants seem to recall. Last year it happened several times and a review of them maybe useful.
The first time was so wicked that it took place o…
Sterling Sell-Off but No Crisis Sterling Sell-Off but No Crisis Reviewed by Marc Chandler on March 01, 2010 Rating: 5
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Euro Drivers

March 01, 2010
The Financial Times carried a story in the weekend edition quoting a couple analysts suggesting that the 10-year bond differentials are helping drive the euro lower. In our analysis, we have generally attributed a greater role to interest rate differentials than to external imbalances. Nevertheless, at this juncture, the interest rate differential…
Euro Drivers Euro Drivers Reviewed by Marc Chandler on March 01, 2010 Rating: 5
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Look to Sell into Sterling Bounce

March 01, 2010
While we have been decidedly sterling negative, the move is taking place much quicker than we (or any one) appears to have anticipated. Both political and economic considerations are behind sterling's slide and M&A flows are not seen as currently helpful.

Sterling is terribly oversold here and a bounce should not be surprising. This bounc…
Look to Sell into Sterling Bounce Look to Sell into Sterling Bounce Reviewed by Marc Chandler on March 01, 2010 Rating: 5
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