FOREX ASIA UPDATE - USD

The USD was softer overnight as the Fed left rates unchanged at 5.25% and the statement basically unchanged, although soft housing market data was probably more responsible for the weakness in the currency.

EURUSD traded up to a high of 1.2623 from a European session low of 1.2558, while USDJPY traded between 118.88 and 119.36.

The Fed said that core inflation had been "elevated" but would ease due to less impact from energy prices and said that inflation expectations were contained.

Interestingly, the Fed appears more confident that the brunt of the slowdown in the US economy associated with the housing sector is probably over, and said that economic expansion was on a solid footing. More important for the markets overnight however was existing home sales, which declined by 1.9% m/m, versus expectations of a 1.2% m/m decline.

We think that the market is unlikely to return to pricing in rate cuts by the Fed and the near future, and correspondingly the USD should maintain a firm tone.

Todays Economic data, durable goods are due at 1230 GMT. The market expects a rise of 2% m/m, and improving global growth expectations should help to underpin the USD. Other data due today includes jobless claims also at 1230 GMT, and new home sales at 1400 GMT. Fed's Geithner speaks at 1300 GMT on "The Implications for Central Banking of an Evolving Global Economy", but he is unlikely to make any comments concerning near-term monetary policy.