Bell FX, CMC Markets Currency Outlook: The Australian Dollar was well bid in overnight trading, particularly against the EUR, as initial optimism over the Cyprus bank bailout plan gave way to concerns about what it could mean for other European economies. Nonetheless, this does not remove the cautious stance of most investors leading into the Easter holiday.

Australia: The market reaction to the Cyprus bailout has been relatively muted, with some details yet to be clarified. The markets have taken the view this is a Europe-centric crisis which by definition won't negatively impact the broader global recovery in 2013, Leanne Terrett, Bell FX analyst for FX Administration and Dealing, said in an emailed note.

CMC Markets chief analyst RicSpooner, on the other hand, pointed out that the recent crisis in Cyprus is a reminder that Europe lacks the institutional framework to regulate banks and deal with problems as they arise.

The AUD seems likely to remain supported by developments in Europe, whose policymakers continue to drive weak investor confidence, Bell FX said.

In economics news today, Reserve Bank of Australia Governor Glenn Stevens is due to speak at the ASIC Forum in Sydney (15:45 AEST) but not much is expected to emanate from it.

In addition, the RBA's half yearly Financial Stability Review is released at 11:30 AEST, please note there was a summary of this in last week's Minutes where it was noted business profitability had fallen and business failure rates were increasing, including from the high AUD.

Majors: In currency markets, EUR crosses were dumped unceremoniously overnight. Although later denied, Eurogroup President
Dijsselbloem was quoted by newswires suggesting the Cypriot bank restructure should be seen as a "template" for future Euro Zone bank recapitalisations.

Causing understandable anxiety among investors that deposits in greater Euro Zone countries such as Italy and Spain may therefore be at risk, markets responded by selling EUR vigorously.

Mr. Spooner of CMC Markets said issues in Europe are being dealt with in crisis mode and are highly subject to the risk of failure due to the different political imperatives of creditor and debtor nations.

"Europe remains a potential issue for markets this week, with the situation on Italy's government remaining uncertain. Against this background, and with the S&P/ASX 200's PE value above long term average levels, investors are likely to adopt a cautious mode leading into the Easter holiday," he added.

In the U.S., Fed chairman Bernanke pushed back against 'currency war' accusations, saying appropriately accommodative monetary policies that support economic growth area 'positive sum' game.

Base metals and agricultural commodities were weaker overnight as enthusiasm for the Cyprus bailout deal waned.

Offshore tonight, the latest UK CBI retail sales report for March will be of interest while in the US, the February durable goods
orders report is the main focus.

Economic Calendar
25 MAR AU Stevens Speaks at ASIC Forum in Sydney
US Consumer Confidence
NZ Trade Balance

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