Euros 2 Won

Don't worry about 2010 growth: We continue to forecast solid, above-consensus global GDP growth of 4.4% this year - despite growth downgrades in Europe, a weaker 1Q in the US (largely weather-related) and the recent softening in the China Manufacturing PMI (reflecting Chinese New Year seasonality, in our view).

Spyros Andreopoulos, Joachim Fels & Major Pradhan, Global Economics Team, Morgan Stanley

Crude oil may decline amid fading risk appetite after China's Prime Minister warned his country may suffer a "double dip" while gold and silver track lower amid firming US interest rate hike expectations ahead of this week's FOMC announcement.

Friday’s close above 1.3700 strengthens the case for the formation of a short-term bottom, but it is 1.3800 that now becomes the key level to watch above.

The US Dollar gained against most major currencies in Asian trade with safe-haven flows boosting demand for the greenback as stocks declined after China’s Prime Minister warned that his country may experience a “double dip” this year.

Currencies have been in the process of consolidating recent moves, with most tracking lower against the buck in early trade Monday.

US Dollar at Risk for Further Declines versus Euro on FX Positioning
Euro Will Struggle to Develop a Trend with Greece Back in the Headlines
Japanese Yen: Speculation for Intervention to Intensify Ahead of BoJ
British Pound May Rise as Bank of England Releases Meeting Minutes
Swiss Franc Vulnerable As SNB Threat Grows
Canadian Dollar on Pace for Parity Against the US Dollar
Australian Dollar May be Losing its Cache as the Only Carry Currency
New Zealand Dollar Drivers Lacking, Ranges Set  to Persist

The dollar put in for a cliff hanger end to the trading week. In an otherwise quiet market, the greenback finally broke from the bonds of congestion that a few prominent pairs have maintained for weeks, and in one case, months. Yet, for those that are trying to discern the currency’s direction, it may surprise them that the move break was a bearish one.

There is a growing divergence in the state of the financial market’s fundamentals and its general level of activity. In the past week, there have been developments that have degraded the fidelity of the Euro Zone, leveraged the threat of a financial crisis in China and added risk to the very assets that are used to establish risk-free returns.

Volatility perked up modestly for the active NYMEX crude contract Friday such that the market would test a new eight-week high of $83.16 before reversing course and potentially forging a bearish breakout. With the week’s close pulling the market below a trendline that has guided the commodity upward for over a month now, a speculative barrier has been removed. What is needed now is momentum; and such 

Swiss Franc Vulnerable As SNB Threat Grows

Fundamental Forecast for Swiss Franc: Neutral

- Swiss National Bank leaves benchmark rate unchanged at 0.25%
- Consumer Prices Decelerated to 0.9% from 1.0%, despite a 0.1% increase in February
- The Swiss unemployment rate fell to 4.4% from 4.5%, but was unchanged at 4.1% on a seasonally adjusted basis.

After starting the week on a choppy note the Swiss Franc saw its appreciation begin to accelerate despite the SNB reaffirming their commitment to prevent excessive franc appreciation. The statement came following the central bank’s policy meeting where they left the benchmark rate unchanged at 0.25%. Building optimism and an unexpected surge in Euro-zone industrial production were the main drivers of Franc support to end the week. The Swiss unit has tracked the single currency as its economic fortunes are dependent on the Euro-area’s recovery. Policy makers have looked to limit the local currency’s appreciation against the Euro but despite the threat of intervention the EUR/CHF closed below 1.4600 for the first time in over a year. The Franc also reached the highest level in a month against the dollar and yen as markets reversed the flight to safety flows generated by the issues in Greece.

Japanese Yen: Speculation for Intervention to Intensify Ahead of BoJ

Fundamental Forecast for Japanese Yen: Bearish

- Current Account Surplus Widens on Rising Exports
- 4Q GDP Expands Less-Than-Expected
- Machine Tool Orders Jump at Record-Pace in February

The Japanese Yen continued to pare the sharp rally from February, with the USD/JPY crossing back above the 50-Day SMA (90.44) to reach a fresh monthly high of 91.08, and the exchange rate looks poised to test the 200-Day SMA (91.86) over the following week as Prime Minister Yukio Hatoyama pledges to temper the appreciation in the low-yielding currency. At the same time, Finance Minister Naoto Kan said that the government stands ready to intervene in the currency markets during a speech in front of the Diet, while Deputy Finance Minister Yoshihiko Noda argued that the economy remains “in a mild deflationary state” and assured to “pay attention” to the Bank of Japan interest rate decision next week as policy makers aim to balance the risks for the economy.

The Canadian unemployment rate unexpectedly fell in February to 8.2% from 8.3% as the economy added another 20,900 jobs. Job growth surpassed estimates of 15,500 building upon the month prior’s gain of 43,000. A surge if 17,8000 in goods producing hires paced the improvement, the sector had lost 38,000 over the precious two months.