Monday Market Update

The US dollar is narrowly mixed in uneventful turnover. Of note, the
dollar selling seen in Asia last week slacken today and the greenback moved
above the pre-weekend highs seen in the US. It is the first time in eight
sessions, the dollar has risen above the previous day’s high against the yen.
Europe seems to be losing interest though, with the dollar near JPY106.60. The
euro dipped below the pre-weekend low and buyers emerged near $.1.2390. For a
third session, sterling demand appeared just below $1.40. The dollar-bloc
currencies are firm, but largely confined to the previous session’s range.

Among emerging markets, the South Korean won is the strongest,
gaining about 0.9%, perhaps encouraged by the return of foreign investors into
the equity market, and it seems particularly the KOSDAQ while jumped 3.3%
higher.
  Part of this is catch-up.  It hadn’t traded since
the middle of last week.   After the gap higher opening it continued to
advance, and closed a little above the 50% retracement of the recent
slide.  Central and Eastern European currencies are firm, while the
Philippine peso and Thai baht are the laggards. The Turkish lira and South
African rand are off about 0.33%.

 Asian equities advanced, with the MSCI Asia Pacific Index up 0.9%;
extending its recovery for a sixth consecutive session. It has retraced nearly
50% of the recent slide.
European markets are struggling and nursing a
small loss through the morning. Two sectors are advancing today, energy and
financials. Bond markets are under pressure in Europe with Italy and Spain’s
10-year yields rising 4-5 bp, while the core is a little less. Greek 10-year
bond yields are off nearly 5 bp following Fitch’s credit upgrade ahead of the
weekend to B from B- (positive outlook). 

Japan reported a slightly smaller than expected trade deficit for
January, which is typically a soft month.
  The monthly deficit is the
first since May last year.  Trade with Asia is distorted by the Lunar New
Year.  Exports were up 12.2%.   Exports to China, were up 30.8% from
a year ago, while exports to the US rose 1.2%.   Exports to all of Asia
rose 16%, and exports to the EU rose 20.8%. The Reuters survey found a median
forecast of 10.3% after a 9.3% rise in December (year-over-year).  Imports
rose 7.9%, while the Reuters survey found a median expectation of 8.3%.  

In Europe, the Latvian Central Bank Governor Rimsevics was
questioned by anti-corruption authorities and house and office were reportedly
searched. 
He is under pressure to resign or at least recuse himself
during the investigation.  

Separately it appears, the country’s third largest bank is coming
pressure as well. 
The ECB has declared a temporary moratorium on the
debt operations of ABLV Bank.  There have been numerous accusations
against the bank for improprieties, culminating in last week US Treasury push
to ban ABLV from the US financial system due to its transaction related to
the North Korea missile program.  The Latvian central bank will lend ABLV
97.5 mln euros (ELA?) and bought government bonds from ABLV yesterday to
bolster its liquidity.  The bank’s bonds have been suspended from the
NADZQ Riga bourse where the bonds trade.  Last week, VISA limited its
service for more than 9000 bank clients.  





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