Major

The euro fell against the dollar and the yen in Asian trade, depressed by uncertainty over how European leaders will tackle Greece's debt crisis. The euro dropped to 1.3453 dollars in Tokyo afternoon trade from 1.3498 in New York late yesterday. In early London market today, the onecurrency dropped further to below 1.34, its lowest since May 2009. Speculation mounted that disagreement among E.U. countries would encourage them to push for Greece receiving aid from the International Monetary Fund, instead of trying to craft an internal package. Meanwhile, the dollar gained against a basket of currencies. The US Dollar Index (.DXY) soared to 81.441, highest since June 2009, compared to 80.896 previously ended. Against the yen, the greenback traded stable at 90.56 during Asia trading hours, up from 90.40 on last night trading in New York. However, the dollar rose to 91.17, a one-month high against the yen during London's early trading hours on the safe-haven's sake. Japan's exports surged 45.3 percent from a year earlier to 5,128.67 billion yen in February, led by auto shipments to the US and electronics parts to Asia. It was the third-biggest annual gain on record. The overall trade surplus came to 651.0 billion yen in the month—bigger than market's expectation— soaring from the year-before surplus of 70.8 billion yen.

Forecast:

Market data on durable goods and new home sales will be released tonight. The market expects a better result on new home sales, boosting the greenback's attractiveness. Expected range: 90.50 – 91.50

USD/IDR

The rupiah continues to trade strong amidst foreign investment inflow to the local stocks and bonds markets. The pair was supported by dollar buying demand from corporate, and traded between 9107 - 9135. Meanwhile, rating agency Fitch released a statement that the country's policy reform holds the key to its debt rating upgraded to investment grade. The agency upgraded Indonesia's rating to 'BB+' in Jan 2010, a notch below investment grade, primarily in recognition of the improvements to sovereign credit-worthiness arising from fiscal policy discipline and falling debt ratios. Meanwhile, the results from today's SBI auction are as follows: 2-month at 6.32334%, 3-month at 6.55365% and 6-month at 6.67822%.

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Major CCY

The euro hovered at its weakest levels in three weeks on Monday and the dollar remained firm as Europe remained divided over aid to debt-burdened Greece ahead of a summit later this week. Uncertainty over Greece and a surprise rate hike by India kept investors cautious about riskier assets, but it lacked momentum to push higher. Japanese domestic markets were closed for a national holiday, leaving yen trade thin. Final approval of healthcare reform by the U.S. House of Representatives saw little immediate dollar reaction. The dollar traded at $1.3522 per euro from $1.3530 last week, after earlier rising to $1.3498, the highest level since March 2. The yen traded at 122.45 per euro from 122.51, after earlier climbing to 122.17, the strongest since March 10. Japan's currency was at 90.50 per dollar.

Forecast:

The dollar will benefit more after a little risk- negative after monetary tightening in India, that also add speculation on more central banks will follow India in raising interest rates boosted demand for safer investments. Expected range: 90.25 – 90.75

USD/IDR

The Rupiah was slightly depreciated from strongest level in 7 months, due to correction in stock market, and regional sentiment. Month-end corporate demand also contributing in today's rupiah weakened. The rupiah traded in the range 9110 – 9130. Opened higher at 9130 but went lower again to lowest at 9110, before closed at 9122. In addition, Senior Deputy Governor Darmin Nasution commented today that Indonesia's central bank doesn't see a need to review its key interest rate. The comments wiped the speculation on interest rate hike next month, as other Asian countries such Malaysia and India already hiked its benchmark rate in the last meeting, and Thailand also indicate to raise its borrowing cost in the coming month.

In other news, Indonesian Finance Minister Sri Mulyani said fast rise in rupiah will not hurt exports. According to the minister, the current level of rupiah value against foreign currencies, especially the U.S. dollars, remains within safe limits for the country's exports. Tomorrow will be IDR bonds auctions for 1yr, 15 yrs, 20 yrs, and 28 yrs tenors, with target auction of IDR 5 trillion.

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USD/JPY

Supported by a solid retail sales data released on Friday last week, the U.S. dollar continued to trade higher against the yen and other major currencies on Monday on hopes of a durable economic recovery while weaker Asian stock market prompted sell off from the riskier assets such as the euro and sterling which have been suffered by sovereign debt concerns. However, the dollar limited its gain on Tuesday after European Union Finance Ministers backed plans to help Greece if needed and Standard & Poor's affirmed its ratings on the debt stricken country. The dollar remained its losses against the euro and yen after the Federal Reserve held U.S. interest rates unchanged and reiterated a pledge to keep rates exceptionally low for an extended period. Meanwhile, the yen edged up to 90.04 from around 90.35 per dollar on Wednesday after BOJ decided to double the size of a lending operation it put in place at an emergency meeting in December but did not extend its duration. However, the yen then reversed its direction and drop to near 90.69 yen per dollar as strong dollar buyers from Japanese life insurers encouraged the yen buyers promptly reversed its positions to sell back the yen after it failed to break below 90 level with some market players disappointed with the BOJ's decision for not extending its operation to six months as expected. On Thursday, the dollar rebounded and rose against higher yielding currencies due to some short covering dollar positions. Meanwhile, the currency remains its strength with the euro fell broadly in the late Tokyo market after a newswire report saying Greece is not hopeful of receiving aid from euro zone members which added to uncertainty over a resolution to its debt problems. In fact, the euro was stabilized afterwards on Friday though remained under pressure on renewed concern about Greece after Athens said it may not be able to achieve its promised deficit cuts if its borrowing costs remain so high.

Forecast:

Market is now focus on Canadian consumer inflation data for February and retail sales for January due later tonight as market is speculating an interest rate hike while the pair may hit parity in the near term. Most importantly, markets are waiting for the development of Greece's deficit problems whether Athens can secure aid from euro zone members at EU summit next week.

Expected range for the week ahead: 89.00– 91.00

USD/IDR

On Monday, the USD/IDR was traded in a thin range between 9162 and 9182 with quiet trades ahead on the national holiday for Nyepi on the next day. Furthermore, the dollar was opened lower at 9155 rupiah on Wednesday in line with the rally in the Asian stock market due to the Federal Reserve's ultra loose policy which successfully brought the risk appetite back into the market. The pair was seen hit the lowest level of the day at 9100 afterwards with the JKSE traded up above 3% at the same time. The rupiah was closed at 9117 while the JKSE ended positive to 2756.262 (+3.25%) at the end of the day. In news, Finance Minister Official Rahmat Waluyanto said that the government will issue a global sukuk in September this year, prefereably after the fasting month. Separately, Indonesia's central bank has announced a 2, 3, and 6 month SBI interest rate of 6.35218%, 6.52418%, and 6.62483% respectively in an auction at the same day with no SBI 1 month this time. On Thursday, in line with the dollar's rebound from the overnight trading, the rupiah was opened slightly higher at 9120 per dollar with thin ranged between 9120 and 9135. Month end corporate demands as well as the resurfaced of Euro zone's crisis concern have prompted the risk aversion and thus prevented the rupiah to further strengthen against the dollar. On Friday, the USD/IDR continued its strength and opened at 9130 due to the higher tension in the euro zone. However, the pair was dragged lower and hit 9095 in line with the gain in the JKSE by 0.21% especially after BI Senior Deputy Governor Nasution mentioned that the central bank expects the rupiah to appreciate further. In fact, it is suspected that the dollar has been sold as a preparation of bond purchased which will be issued next Tuesday. Separately, according to Finance Minister Sri Mulyani, March annual inflation should be higher than that in February but will likely meet 2010 inflation target if the rupiah strength is able to contain prices while she also ascribed the upward trend to rising commodity prices.

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