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Fundamental Morning Wrap: Asian FX leads focus this morning

FXstreet.com (Barcelona) - This morning has seen a slew of institutional research which has a mix of focus, split between JPY, the key currency of the present moment, EUR, for its troubles, and CNY, which looks receptive to a loosening of the band it holds with the dollar.


BNP Paribas economist Raymond Van Der Putten is expecting an export rebound after Chinese New Year, noting that in March, exports rebounded largely due to more shipments to Asia after the Chinese New Year. He writes, “Exports are gradually strengthening thanks to a pick-up in world trade and the depreciation of the yen. However, the latter has resulted in a deterioration in the terms of trade. The trade balance is expected to remain firmly in the red.” Danske Bank analysts note that a draft communique out of the G20 summit suggests that Japan will not be singled out for criticism, which helped to prop up USD/JPY after an earlier drop on data showed Japanese investors continued to sell foreign bonds this week. Lee Hardman of BTMU notes that The Nikkei has reported overnight that the BoJ’s updated Outlook Report released next week may forecast inflation hitting the target by spring 2015 according to unidentified people familiar with the bank’s thinking. DBS Group analysts note that two-thirds of the Japanese public believe that the inflation target can be hit within a year.


The BAML European Economic Team have taken a look at Portugal and note that good implementation is not enough. They feel that the crisis in Portugal was an accident waiting to happen as imbalances widened in the pre-crisis period. However, despite difficulties, they note that the country has been implementing the program it has agreed with the Troika. However, they note that the economy remains weak and government debt dynamic are fragile. Lee Hardman of BTMU notes that EUR/USD corrected lower to the 1.30 level yesterday following comments from the Buba´s Weidman and former ECB representative Smagi, who made more dovish commentary. Sebastien Galy of Societe Generale believes that a combination of structure considerations on both sides of the pair should see EUR/USD hit 1.20 ahead. Jim Reid of Deutsche Bank notes that later today, the Italian Parliament will meet to elect a successor to President Napolitano.


Irene Cheung of ANZ notes that CNY consolidation beckons after strong performance, and has performed strongly month to date in April, gaining 0.5% against the dollar. She adds that with the G20 draft statement out this morning, she thinks that USD/CNY may not see continued lower fixings. Further, she feels that a band widening, highlighted by PBoC officials in not as imminent as it may appear. Lee Hardman of BTMU reiterates the band widening news, adding that a stronger Yuan over the next six to twelve months should support Asian currencies more broadly ahead.

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