Asia Market Update - USD firms ahead of new home sales data

- New Zealand trade deficits narrows on a surge in exports: (NZ FEB TRADE BALANCE: -NZ$0.127B V -NZ$0.250B expected; Imports: NZ$2.97B v NZ$3.10B expected; Exports: NZ$2.85B v NZ$2.90B expected) New Zealand exports benefited from the continuing strength in global commodity prices. The trade balance for the February 2007 year was a deficit of NZ$5.8 billion, or 16.8% of exports, down from a deficit of NZ$7.3 billion in the prior year. The Kiwi dollar failed to gain support from the data, as the NZD/USD dipped below 0.7100, tracking losses on other high yielding currencies.

- Reserve Bank of Australia financial stability review: The RBA said it currently sees few risks to financial stability in Australia with the level of problem loans quite low. The RBA added that job growth in the Aussie economy is strong.

- Forex: German newspaper Sueddeutsche Zeitung reported that the International Monetary Fund will say further depreciation by the USD is needed to help correct global imbalances in its latest World Economic Outlook report due this week. The near term outlook for the USD has turned bullish. June Eurodollars, at the close on Friday, priced in about a 56% chance for the Fed to cut rates by 25bps to 5% in the 2Q, down from about a 64% chance as factored in at Thursday's close. The Malaysian ringgit climbed to a new 9yr high against the USD, with the Malaysian central bank buying back USD towards the afternoon session to bring the USD/MYR back to the unchanged level. The Thai baht lost 3% against the USD after the pro-growth finance minister in Thailand said that the country needs lower rates to jump-start the economy. The JPY was firmer at the start of the week, with the Swiss franc little changed against the USD.

- Asian Equities: The Nikkei 225 opened higher in reaction to Friday's US existing home-sales report, but later gave back gains many traders stayed on the sidelines before stocks go ex-dividend on Tuesday. Declines in the Nikkei were led by Tepco on concerns that the company attempted to withhold information related to prior nuclear accidents. Japanese real estate shares declines on profit-taking after the shares were bid up ahead of last week release of Japan's nationwide land prices. The Kospi is little changed as gains in shares of Hynix and Samsung were offset by losses in shares of Posco (Mittal Steel denied that it would bid for Posco). M&A continues to be the big theme down under, with the ASX200 up by 0.50%. Shares of Coles Group gained after its reported earnings and reiterated that it is looking to be sold. Despite a rise in existing U.S. home sales, shares of James Hardie traded lower by close to 1.0%. New Zealand shares are higher by more than 0.75%, as Telecom NZ gained more than 2% after the company said that it sold its yellow pages directories unit. The Hang Seng index is little changed, as the market continues to consolidate and in the absence of any fresh local or China news.

- Commodities: Crude oil is current trading above $62.50 as markets digest recent develops with respect to Iran. Gold is also gaining on geopolitical concerns and higher oil prices. Shanghai copper is currently trading lower, despite gains in the LME contract.

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