FOREX ASIA UPDATE - USD

The dollar is weaker against most major currencies and in particular against the CHF and JPY as the market treads warily ahead of the G7 meeting.
Meanwhile, the high-yielding and carry-laden NZD was the worst performing currency.

Treasury Secretary Paulson said in his testimony to the Ways and Means Committee that the Treasury has no evidence that Japanese authorities have intervened in the markets since 2004 to manipulate the value of the yen.
He also said China agrees on the principles of FX reform, but disagrees with the US on the urgency of reform.

Meanwhile the Fed's Yellen made few comments of interest on the outlook for rates, but with regards to China, said that the country is "having trouble even now in conducting an independent monetary policy" given the rise in FX reserves and the trade surplus.

Overall, it looks like the US will not be taking an aggressive stance on FX matters at the upcoming G7 meeting. As such we think the pre-G7 effect of a decline in high-yielding currencies will reverse.
Moreover, we expect US economic data to deteriorate ahead of the March FOMC, with next Wednesday's retail sales for January being the next key data point.

Looking ahead, Treasury Secretary Paulson testifies on the FY 2008 Budget before the House Budget Committee at 1500 GMT.
Fed President Plosser speaks on the economic outlook at 1315 GMT.