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Asian Session – US dollar rallies to multi-year highs as the Fed seen hiking earlier

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Printing-moneyThe US dollar rallied to fresh highs, pushing the euro below the 1.08 handle to 1.0784 – a near 12-year low, while it also rose sharply versus the yen to make a new 7 ½ year high at 122.01.  Interestingly the UK pound was more resistant to the dollar’s advances and refused to make a fresh low below 1.4950 by trading at 1.5088.

The euro was further weighed down by a couple of factors; firstly that the European Central Bank had started its Quantitative Easing program on Monday by purchasing Eurozone core government bonds and secondly, a meeting of Eurozone finance ministers on Greece did not manage to reach a successful conclusion and decided that talks will continue on a technical level.  Greece was apparently quickly running out of cash but the head of the Eurogroup accused the country of wasting time.  Tension between Greece and its lenders therefore resurfaced as a theme for the markets not long after the February 20 agreement for a loan extension.

In the United States, the Dallas Fed President Richard Fisher, a non-voting member of the monetary policy setting committee, reiterated the mantra that has also been heard from other Fed officials lately; mainly that it was better to raise rates sooner and more gradually rather than later and more steeply.  Fisher, who is perceived as hawkish, said that low wage growth should not be given too much weight in decisions as unemployment is dropping quickly.

In China, consumer prices climbed more than expected at 1.4% year-on-year but producer prices posted a bigger fall than anticipated at -4.8% as perhaps the two numbers balanced each other out.  Overall though, the positive inflation numbers could take some pressure off the authorities to provide further stimulus.

In New Zealand, anonymous threats to poison the country’s production of milk powder by protesters which resisted the usage of certain pesticides, also hurt the kiwi as milk powder is the country’s top export.  The New Zealand dollar made a 1-month low against the greenback at 0.7275, while the Reserve Bank of New Zealand is meeting before the Asian session starts on Thursday.  It is expected to keep its interest rate unchanged at 3.50%.

No important data is expected during the remainder of the day, but a number of central bank policy makers will be speaking such as Mersch and Nowotny from the ECB and Carney, Fisher and McCafferty from the Bank of England.

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