Expert Analysis of Today's Market

• In New York trading Monday, the dollar was higher against the yen but sharply lower against the Canadian dollar. Standard & Poor’s announced that it maintains the top AAA credit ratings of the nation’s two biggest bond insurers MBIA and Ambac Financial. That bond insurers keep their AAA ratings is crucial for confidence in the markets. Investors are getting back into risk, buying higher-yielding assets with loans made in Japan. The European currencies were little changed ahead of Federal Reserve Chairman Ben S. Bernanke’s testimony to the US Congress on February 27 and 28. The FX market awaits his read on US growth/inflation risk as well as his perception of the depth of the credit crisis. The Canadian dollar rallied strongly.


• The USD/JPY rose as US equity prices rallied on the S&P’s announcement, easing concern of a worsening credit crunch. The pair is testing the 108-area resistance. There is support in 105-106. The pair will continue to follow the stock market.

Financial and Economic News and Comments

US & Canada

• US existing-home sales fell a less-than-expected 0.4% m/m to a 4.89 million annual rate in January, the National Association of Realtors said. The median home price fell 4.6% y/y to $201,100 in January, down from $210,900 in January 2007. Inventories of homes increased 5.5% at the end of January to 4.19 million available for sale, which represented a 10.3-month supply at the current sales pace. Inventories are 18.4% higher than a year ago.

Europe

• UK house prices fell 0.2% m/m in February pushing annual house price inflation to a 22-month low of 1.4% y/y, from 2.3% y/y in January, Hometrack reported.


• Bank of England’s Monetary Policy Committee member Kate Barker said there isn’t a strong chance of a recession in the UK although the year ahead is likely to be challenging. “Recession remains outside the main possibilities….We have got this combination of shocks coming from abroad and it’s difficult....We certainly expect a period of greater volatility this year,” Ms. Barker said.

Asia-Pacific

• China’s stocks declined, dragging China’s benchmark to a 6-month low, on speculation new shares will dilute existing holdings and after the People’s Bank of China said it will continue to order banks to set aside more reserves.

FX Strategy Update