The Dollar Finds Better Footing

Japan reported an unexpected decline in the January unemployment rate to 2.9% but only because the December series was revised to 3.0% from 2.9%. On the other hand, the job-to applicant ratio jumped to 1.10 from a revised 1.05. It is the highest since last June. Public investment in construction seemed to be partly responsible for the tick-up, but it appears likely that the emergency discouraged people from looking for jobs. 

For the fifth consecutive session, the dollar rose above the previous session's high. It is in a narrow range above JPY106.70 and below JPY106.95. It has not been this high since last August. A move above JPY107 would target the JPY107.50 area, but we suspect the initial potential extends toward JPY108.00. It is notable that despite the greenback's gains, implied volatility is softer, and the benchmark three-month measure is lower for the second session and around 6.24% below last week's lows. The Australian dollar is quiet. It is inside yesterday's range, which itself was inside the pre-weekend range. The consolidative tone keeps the Aussie below $0.7780. A move above the $0.7820 area could signal the end of the consolidative phase. Alternatively, a break of $0.7700 would suggest a deeper correction has begun. The dollar's reference rate was set at CNY6.4625 today, a little firmer than expected. The broadly sideways price action that has persisted since the start of the year is now being attributed to the caution ahead of the National People's Congress that starts at the end of the week.  


The preliminary eurozone February CPI was in line with expectations. It rose by 0.2% on the month for an unchanged 0.9% year-over-year pace. The core rate slipped to 1.1%, as projected, from 1.4%. Energy will likely have a greater impact as last spring's precipitous decline falls out of the year-over-year comparisons. The ECB meets next week (March 11), and the risk is that the near-term growth forecasts are reduced. The focus at the meeting will likely be on measuring financial conditions, which seems to be the key to the declaratory policy.  

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Read more by Marc on his site Marc to Market.

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