FOREX ASIA UPDATE - USD

The dollar is little changed against most major currencies since European trading opened yesterday.

EURUSD has traded up to a high of 1.2968 from 1.2908, while USDJPY traded to a new 4-year high of 122.20.

USDJPY 3-month implied vols are still at relatively elevated levels of 7.1%, up from 6.5% last week and versus much tamer 6.2% vols for EURUSD.

However, of greatest interest was the decline in oil prices overnight, with the benchmark Nymex crude futures contract now trading at US$53.85/bbl, down from Friday's close of US$55.42 and again failing to break through the US$56 resistance level.

Developments in the oil market are worth watching since weather appears to be normalising and global growth expectations have not deteriorated this year.

It still seems then that we are in a fragile environment for speculative trades, and the potential for position adjustment on unprofitable trades remains high.

Our core view for the dollar is that we expect US data to take a turn for the worse in the weeks ahead, as weather effects fade and the spillover from the housing slowdown continues. However, our economists note that this week's heavy slate of US data will continued to reflect good weather, and we look for stable to strong numbers from the key payrolls release (190k), ISM (51.5), and Q4 GDP (+3.0% q/q ann.).