Australia: The Australian Dollar has opened firmer this morning and is trading just south of USD 1.0300, having found continued support from solid equity markets and a healthy risk appetite in the financial markets. Speculation of M&A activity in Australia and solid demand out of China for the currency continue.

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The AUD is also benefitting from carry trade activity. On the heels of the natural disasters in Japan, investors are re-establishing long AUD positions. Intervention in the JPY by the BoJ and G7 was a critical development. Base metals finished higher overnight with lead up 2.1%, zinc +1.5%, nickel +1.4% and aluminium +1.3%. Gold was steady trading down 0.1% at US$1,418.80 per ounce while oil rose 0.7% to be trading at US$104.74 per barrel. We expect the AUD to remain firm, to take a positive lead from equity markets and not be overly influenced by local data today
Majors: The US Dollar received a boost last night on comments from St Louis Fed President James Bullard, who commented the Fed may look to cut US$100m from the US$600m QEII program. It should be noted Bullard is not an FOMC voter this year. He expects the economy to be "strong" in 2011, however, his views seem to be solitary, as other Fed officials, including Chairman Bernanke, favour the completion of QEII as planned.

The US stock market strengthened again despite some soft US consumer confidence data and S&P's downgrade of Portugal and Greece, and the focus mid week for the markets is the Non-Farm Payrolls figure on Friday. Last month's number was a gain of 192k and this month's consensus is a similar result. An ECB rate hike is likely despite the sovereign debt downgrades and in Japan, the Government estimates damage from the earthquake and tsunami will be as high as A$306bn.

Economic Calendar

AU: Job Vacancies Feb
AU: HIA New Home Sales Feb
EU: Euro-zone Consumer Confidence Mar

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