Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

BNP Paribas - ECB vs FOMC by riteshbhansali

VIEWS: 22 PAGES: 26

									                                                                                                             Click on the logo to take part




                                                                                 This publication is classified as non-objective research


   Foreign Exchange                                                                                               1 March 2012

   FX Weekly: ECB vs FOMC

   FX Weekly Outlook                    2    G10 Weekly FX Outlook – EURUSD in the hands of
   G10 Themes                           3    ECB and Fed
   FX Technical Analysis                11
   FX Recommendations                   12
                                             G10 Themes
   Market Sentiment &
                                        14        EURUSD after LTRO II and Ben Bernanke Part I
   Positioning
   Weekly Currency Summary              18            How LTRO II plays out for EUR partly depends on the Fed
                                                      USD is likely to remain the funding currency of choice, in which
   Economic Calendar                    22            case EURUSD should come to little harm
   Forecasts                            25            If LTRO II fuels credit expansion, EUR could suffer
   Contacts                             26
                                                  USDJPY – BoJ vs. the Fed: No Contest
                                                      We reiterate our view that neither the trade deficit nor the recent
                                                      expansion of the BoJ’s asset-purchase programme is a valid
                                                      reason for sending USDJPY higher.
                                                      We are re-entering a short USDJPY position at the current level
                                                      of 81.15 with a stop at 82.50 with a target of 77.00.

 Currency Performance vs.                         AUDUSD: Stress Testing our Bullish AUD View
       USD 1 Week                                     Deviation between AUD and Terms of Trade is not large
                                                      enough to warrant RBA action
 GB P                                                 Evidence of ‘Dutch Disease’ afflicting the Australian economy is
 CA D                                                 thin on the ground
                                                      We continue to forecast new highs for AUDUSD, but the view
 NOK
                                                      remains highly dependent on the Fed
 A UD

 SEK
                                             FX Technical Analysis
                                                      Short term technical rebound in AUDNZD before medium term
 NZD
                                                      downtrend resumes.
 EUR                                                  GBPUSD positive outlook after triangle break, targeting 1.6114
 CHF

 JP Y                                        FX Recommendations
        -2    -1        0       1   2                 Short USDJPY at 81.15, targeting 77, stop loss 82.5
                                                      Long 5x EURNOK and Long 1x Oil Brent
                                                              st
                                                      Long 31 Dec 12 AUDUSD 1.15 Digital with 1.0350 KO
 Currency Performance vs.
                                                      Long 2M 1.0725/1.1025 1x2 AUDUSD Call Spread 1.05 KO
       USD 1 Month
                                                      Long 2M USDCAD 0.9800 Digital
 NOK                                                  Long 8.90 EURSEK 3M call with 9.50 KO
                                                      Long EURCHF structure targeting 1.2800
 SEK

 NZD                                         Market Sentiment & Positioning
 EUR                                                  CFTC report shows investors continue to reduce their GBP
                                                      short exposure suggesting scope for further GBP strength.
 A UD
                                                      Net JPY long position has been unwound substantially,
 CHF                                                  providing less support for USDJPY bulls from hereon.
 GB P                                                 Our indicators recommend long GBPJPY positions.
 CA D
                                                                       Currency Views
 JP Y
                                                                                 Current              1 Month            3 Month
        -10        -5       0       5
                                             EURUSD                              1.3320                  1.33                1.35
                                             USDJPY                              81.10                  76.50               75.00
                                             USDCHF                              0.9050                  0.92                0.93
                                             GBPUSD                              1.5950                1.6200              1.6300


Thursday, 01 March 2012                                                                      Bloomberg BPFR <GO>
FX Weekly                                                                   http://www.GlobalMarkets.bnpparibas.com
                                                                                 This publication is classified as non-objective research



G10 FX Outlook - EURUSD in the hands of ECB and Fed
Michael Sneyd                           EURUSD to be driven by the relative stance of the ECB and Fed.
                                        Strong NFP expectations may keep USD supported next week.
+44(0) 207 7595 1307
                                        The likelihood of QE3 and USD weakness remains high, we sell
                                        USDJPY and reiterate our long AUDUSD trades.

AUD and CAD to continue to        The ECB's slightly larger-than-expected LTRO and Bernanke's perceivably
   benefit from LTRO; EUR         less-dovish testimony this week has begged the question of whether the
           impact less clear
                                  relative stance of the two central banks is shifting, and, ultimately, whether the
                                  EUR might usurp the USD as the market’s funding currency of choice. It is a
                                  clearer acknowledgement that the latest LTRO is supportive of risk appetite as
                                  eurozone sovereign markets continue to improve and eurozone tail risks
                                  diminish further. This should drive further gains in AUD and CAD, but the EUR
                                  response remains somewhat harder to predict.

  At the very least the ECB is    Next week the ECB is likely to leave the door open for policy easing even if it
           likely to maintain a   does not take the opportunity to cut interest rates. Meanwhile, Mr. Bernanke is
  commitment to support the
eurozone economy, while the       not scheduled to speak again until after the next FOMC meeting on 13 March
      market may continue to      which allows investors to continue questioning QE3 (as well as the ‘late 2014’
  question QE3 from the Fed       low-rates commitment). This is especially likely to be the case if next week’s
                                  non-farm payrolls meet consensus expectations for another +200k rise.
                                  However, we expect that a majority of the FOMC will remain focused on the
                                  US’s large unemployment gap and ongoing housing market weakness. Indeed,
                                  in light of recent data suggesting that the economy is not building momentum,
                                  BNP Paribas' US economists think that the prospects for QE3 have, if
                                  anything, increased. We therefore do not expect EURUSD to deviate too far
                                  from our end-Q1 forecast of 1.33. We continue this discussion on page 4.

     Next week’s data should      If payroll data serves to maintain perceptions of an improvement in the
     continue to support risk     economic backdrop (but with which we take issue after this week’s durable
                    appetite
                                  goods orders, personal spending and manufacturing ISM reports) this should
                                  continue to support risk appetite and boost our current favoured G10
                                  currencies – AUD and CAD. Monday’s services PMIs are the other main data
                                  of note.

 RBA may comment on AUD           We expect no policy change from the RBA next week. However, following RBA
 strength next week, but not      Governor Stevens’ recent concerns about the strength of AUD, the
              derail the rally
                                  accompanying statement may warn that that the RBA is monitoring the
                                  exchange rate closely. Any pullback on such comment is likely to be temporary.
                                  The gap between a (weakening) term-of-trade and the AUD that the RBA has
                                  expressed concern about is not large enough in our opinion to warrant policy
                                  action. We reiterate our long AUD stance on page 11, but acknowledge that
                                  AUDUSD making new highs is conditional on additional Fed easing.

  We have re-entered a short      USDJPY upward momentum has stalled despite a weekly close above the
           USDJPY position        upper level of the Ichimoku cloud. Domestic Japanese pressures are unlikely to
                                  be able to drive USDJPY higher, although US 2-yr treasury yields failure to
                                  sustain a break below 30bp continues to provide USDJPY with some support.
                                  We expect USDJPY to drift lower again over next 6-8 weeks and have re-
                                  entered a short USDJPY trade this week targeting 77. See page 6.



Thursday, 01 March 2012                                                                      Bloomberg BPFR <GO>
FX Weekly                                               2                   http://www.GlobalMarkets.bnpparibas.com
                                                                                                        This publication is classified as non-objective research



EURUSD after LTRO II and Ben Bernanke Part I
Ray Attrill                                          How LTRO II plays out for EUR partly depends on the Fed
                                                     USD is likely to remain the funding currency of choice, in which
+1 212 841 2492
                                                     case EURUSD should come to little harm
                                                     If LTRO II fuels credit expansion, EUR could suffer

       LTRO II allotment plus             The juxtaposition of a slightly bigger-than-expected second 3-year LTRO from
        reporting of Bernanke             the ECB announced on Wednesday and the reporting of some of Fed
      testimony part I elicited
    strong negative EURUSD                Chairman Bernanke’s comments before the House Banking Committee is
                      reaction            asking questions of the EURUSD exchange rate. In particular, Mr. Bernanke’s
                                          acknowledgement of somewhat stronger labour market data than the Fed had
                                          expected and the absence of direct references to potential additional QE
                                          measures elicited a powerful positive USD reaction. Our view remains that,
                                          unless Fed QE3 is taken off the table, the EURUSD rate is prone to spend time
                                          above 1.3500 in H2 2012 and could reach as high as 1.40. Otherwise, highs
                                          for EURUSD could now be in near 1.35. But how the ECB’s latest non-
                                          standard policy measures will play out in terms of credit growth, support for
                                          eurozone sovereign bond markets and the real economy remain uncertain and
                                          are a big swing variable for EURUSD in the weeks and months ahead.

    FX price action this week             Taking the Fed first, regardless of the practical significance of what the Fed
    clearly demonstrates the              chairman said this week, the market reaction demonstrates very clearly that
       primacy of Fed policy
        thinking for the USD              market sentiment towards Fed policy is going to be absolutely pivotal to how
                                          not just the EURUSD rate behaves in coming months but also how the USD in
                                          general acts. In particular, it affects sentiment with respect to both the
                                          prospects of additional QE and the veracity of the (conditional) commitment to
                                          keep rates low at least though late 2014. This includes USDJPY and where at
                                          least some of the recent volatility in the exchange rate relates to the move
                                          higher in short- and intermediate-dated Treasury yields. We discussed this in
                                          some detail in last week’s edition of both our FX Weekly and Market Mover
                                          (see “The USD and the Fed – Regime Shift in FX Markets”). In light of recent
                                          data suggesting that the economy is not building momentum, BNP Paribas' US
                                          economists think that the prospects for QE3 have, if anything, increased. The
                                          end-2014 low rates commitment should also continue to be taken at face value.
                                          We are not ready to call time on USD weakness.

          Chart 1: EURUSD vs. LTROs I and II                                           Chart 2: US/Eurozone Credit vs. EURUSD
1.4 5 0                                                              55        0 .63                                                                    1 .7
                                                                                             R atio of U S /E u ro zo n e cre dit (lh s)
1.4 2 5            E U R U S D (lh s)                                50        0 .62                                                                    1 .6

                                                                               0 .61                                                                    1 .5
1.4 0 0                                                              45
                                              3 -yr LT R O s
                                              a llo tm e n t                   0 .60                                                                    1 .4
1.3 7 5                                                              40
                                              a n no u nce m e nts
                                                                               0 .59                                                                    1 .3
1.3 5 0                                                              35
                                                                               0 .58                                                                    1 .2
1.3 2 5                                                              30                                           EURUSD
                                                                               0 .57                                                                    1 .1
1.3 0 0                                                              25
                                                                               0 .56                                                                    1 .0
                V IX (rh s)
1.2 7 5                                                              20        0 .55                                                                    0 .9

1.2 5 0                                                              15        0 .54                                                                    0 .8
          Sep      O ct        Nov      Dec       Jan        Fe b                   98     00      02       04       06        08        10        12
                          11                            12


Source: Reuters Ecowin, Bloomberg, BNP Paribas                                Source: Reuters Ecowin, Bloomberg, BNP Paribas

Thursday, 01 March 2012                                                                                            Bloomberg BPFR <GO>
FX Weekly                                                                 3                       http://www.GlobalMarkets.bnpparibas.com
                                                                               This publication is classified as non-objective research


    LTRO impact on the EUR      How the 3-yr LTRO II will play out for the euro remains a complex question.
   reflects strong competing    The EURUSD price action between the time the allotment under the first LTRO
                     currents
                                was announced in December and yesterday’s allotment illustrates the force of
                                two main sides to the argument (see Chart 1). The initial temptation in
                                December was to view the LTRO as the ECB equivalent of Quantitative Easing
                                (QE) and to sell the euro on the same argument (central bank balance sheet
                                expansion) used to rationalise dollar weakness ahead of and during Fed QE
                                episodes. Not long thereafter, appreciation that the LTRO would go a long way
                                to eliminating the tail risk of a eurozone banking sector calamity, allowing
                                banks to meet the bulk of 2012 (and some 2013) funding needs from the ECB,
                                saw EURUSD rally. This was also evident in a sharp move higher in euro
                                cross-currency basis swaps. In addition, belief that some LTRO cash would be
                                used to purchase eurozone sovereign debt – in the likes of Italy and Spain in
                                particular – saw most euro-peripheral bond spreads compress, a euro-
                                supportive term in our EURUSD fair value estimations. Clearly, the political
                                and market machinations related to Greece further complicated the equation,
                                but the competing FX forces with respect to the LTRO were still visible.

  LTRO II may have different    The added complexity in interpreting how the new EUR529bn, LTRO II plays
  impact than LTRO I – bank     out concerns whether banks will deploy LTRO II funds differently from LTRO I.
        lending response is
                   critical…    ECB President Mario Draghi clearly hopes that they will, making clear that,
                                whereas the primary purpose of LTRO I was to allow banks to meet upcoming
                                liability refinancing needs, LTRO II was intended to support the real economy
                                via a greater willingness and ability by banks to extend credit to the private
                                sector. In sharp contrast, the Bundesbank appears to fear exactly this, that
                                banks will be encouraged to undertake more risky activities thanks to the
                                ECB’s largesse and that this will store up bigger problems for the future
                                (including, presumably, inflation risks in Germany and elsewhere).

  …as to whether EUR could       Whether or not credit growth within the eurozone proves to be significantly
  usurp USD as risk-funding     higher than otherwise because of LTRO II is important for the Euro, and on two
           vehicle of choice
                                levels. If it succeeds in reducing risk of a credit crunch and indeed facilitates a
                                pick up in credit expansion, i.e., credit or money multipliers are seen to be
                                working, then this would tend to play negative for EURUSD. Yet if credit fails
                                to respond positively to the LTRO II, then this makes further ECB policy easing,
                                via further rate cuts and possibly more QE-type policies beyond LTROs, that
                                much more likely. This could ultimately be even more negative for the euro.
                                Either way, the point is that over long periods there is a reasonable positive
                                correlation between relative Eurozone/US credit growth and EURUSD.

                                Perhaps the most benign scenario for the euro is one where credit growth
                                draws just enough support from LTRO II for the ECB to desist from additional
                                easing measures; and at the same time, LTRO II supports the euro via the
                                additional reduction in tail-risks and support for euro-peripheral sovereign debt
                                markets. Under this scenario, but where the Fed does indeed proceed to QE3
                                and which preserves the dollar’s preferred funding status, the net impact on
                                EURUSD could well be positive.




Thursday, 01 March 2012                                                                     Bloomberg BPFR <GO>
FX Weekly                                             4                    http://www.GlobalMarkets.bnpparibas.com
                                                                                This publication is classified as non-objective research



USDJPY – BoJ vs. the Fed: No Contest
Rob Ryan                               We reiterate our view that neither the trade deficit nor the recent
                                       expansion of the BoJ’s asset-purchase programme is a valid
+65 6210 3314
                                       reason for sending USDJPY higher.
                                       We are re-entering a short USDJPY position at the current level of
                                       81.15 with a stop at 82.50 with a target of 77.00 over the next 6-8
                                       weeks.


    Domestic factors are not     We have argued in recent weeks that despite a number of headline-grabbing
  sufficient to drive USDJPY     developments, the conditions are not yet in place for a sustainable rise in
                     higher …
                                 USDJPY. The trade deficit is being more than offset by the income account;
                                 while annual flows are being dwarfed by capital flows accumulated over many
                                 years. The BoJ has eased further, but the additional JPY 10trn of asset
                                 purchases is unlikely to be any more successful than previous easing
                                 measures. And despite the somewhat more formal CPI target of 1%, there is
                                 little sign of a more meaningful shift in monetary policy.

   … technical momentum is       We have previously acknowledged two risks to our bearish USDJPY view. The
                 stalling …      first is the risk that technical momentum will carry the pair significantly higher
                                 on a break of the key 81 level. This momentum has not been apparent,
                                 although the danger has not passed entirely.

… USDJPY remains hostage         The second risk is that the prospect of QE3 is shelved and the attraction of the
   to market perceptions of      USD as the globe’s preferred funding currency is severely diminished. If this
 likely Fed monetary policy
                                 were to happen, we think investors would search for alternatives, and the JPY
                                 would certainly be among the candidates. Indeed, this is likely just a matter of
                                 time. At some stage, the normalisation of Fed monetary policy is going to
                                 trigger an unwinding of currency hedges by Japanese bond managers and a
                                 shift back into the yen as a funding currency. But we do not believe that this is
                                 imminent by any means. As yet, there seems to be little grounds for concluding
                                 that the Fed is done with QE. To be sure, the first day of Chairman Ben
                                 Bernanke’s semi-annual testimony did not flash the QE green light, but neither
                                 did it put on the brakes. We continue to see QE3 as more likely than not and,
                                 as a result, see little justification for a continued move higher in USDJPY.

We re-enter a short USDJPY       We are re-entering a short USDJPY position at the current level of 81.15
                 position …      with a stop at 82.50 (well above the early Monday high of 81.66 and a level at
                                 which a clear break higher would be confirmed), with a target of 77.00 over
                                 the next 6-8 weeks.

                                 An an alternative, we would suggest the following options strategy:

      … and suggest a cheap      Buy a three-month 1x2 USDJPY 79.00/76.00 put spread with a knock-out
 options strategy for the less   at 83.00 for 0.33% USD spot 81.15, NY cut.
                        brave
                                 We see any move lower as likely to be laboured, with verbal and semi-official
                                 intervention likely to slow the move. The knock-out barrier cheapens the
                                 strategy by almost 25%, but at little opportunity cost. A continuation of the
                                 move to 83.00 would suggest that a move lower is no longer likely.




Thursday, 01 March 2012                                                                     Bloomberg BPFR <GO>
FX Weekly                                             5                    http://www.GlobalMarkets.bnpparibas.com
                                                                                       This publication is classified as non-objective research



AUDUSD: Stress Testing our Bullish AUD View
Raymond Attrill                             Deviation between the AUD and the terms of trade is not large
                                            enough to warrant RBA action.
+1 212 841 2492
                                            Evidence of ‘Dutch disease’ afflicting the Australian economy is
Mary Nicola                                 thin on the ground.
                                            We continue to forecast new highs for AUDUSD, but the view
+1 212 841 2409
                                            remains highly dependent on the Fed.

 RBA is now publicly voicing           For the first time since Q4 2008, when the central bank intervened to support
          disquiet over AUD            the Australian dollar at the height of the post-Lehman US dollar liquidity crisis,
                 strength….
                                       the RBA appears to have an issue with the exchange rate. Governor Glenn
                                       Stevens last week observed that, ‘We do continue to ask ourselves whether
                                       what is happening in the currency makes sense. …The most recent bout of
                                       strength is happening at a time when the terms of trade have actually peaked
                                       and started to come down. That is a bit odd.” Stevens's remarks followed
                                       comment from incoming RBA Board member Heather Ridout on 8 February
                                       that, “There’s too much froth in the Australian currency,” and that “speculative”
                                       buying stoked by interest rate differentials had spurred the local dollar. She
                                       argued that monetary policy has been given “an awful lot of support in Australia
                                       by the high dollar and it does need to be factored in,” adding that, “I will be
                                       making those points pretty strongly when I sit at that table”. Ridout sits at the
                                       table for the first time on Tuesday.

       …. but an early policy          While both Stevens’s and Ridout’s comments have something to be said for
        response to currency           them, we are not particularly sympathetic to the arguments of either of them as
   strength is highly unlikely
                                       things stand. Certainly, we do not a regard a policy response from the central
                                       bank to exchange rate strength – either via currency intervention or lower
                                       interest rates – as close, albeit we acknowledge risk that the RBA again makes
                                       known its concerns about currency strength following its March 6 Board
                                       meeting. Indeed, we maintain our view that the Australian dollar has further
                                       appreciation ahead of it and that AUDUSD is capable of hitting 1.15 later this
                                       year. This, we stress, is a view highly contingent upon the Fed electing to
                                       undertake additional balance sheet expansion, which is seen as further
                                       undermining the US dollar. It also hinges on Chinese growth re-accelerating in
                                       the second half of the year and in a manner that contributes to renewed
                                       strength in commodity prices such that Australia’s terms of trade returns closer
           Chart 1: AUD TWI vs. Terms of Trade                                Chart 2: AUDTWI vs. CRB Index
1.8                                                      120      85                                                                    600
                              Australia ToT                                                                        A UD TW I
1.7                                                      115
                                                                  80                                                                    550
1.6                                                      110
1.5                                                      105      75                                                                    500
1.4                                                      100
1.3                                                        95     70                                                                    450

1.2                                                        90     65                                          C RB index (rhs) 400
1.1                                                        85
1.0                                                        80     60                                                                    350
0.9                            AU D TW I (rhs)             75
                                                                  55                                                                    300
0.8                                                        70
0.7                                                        65     50                                                                    250
      98   00     02     04       06      08     10                      07       08          09            10            11       12

Source: Reuters EcoWin Pro                                       Source: Reuters EcoWin Pro

Thursday, 01 March 2012                                                                            Bloomberg BPFR <GO>
FX Weekly                                                   6                     http://www.GlobalMarkets.bnpparibas.com
                                                                                    This publication is classified as non-objective research


                                    to 2011’s highs (and which is at odds with the RBA’s own forecast for the likely
                                    evolution of the terms of trade). If neither condition is fulfilled, highs for
                                    AUDUSD should be in.

   Terms of trade have fallen       Stevens’s comments are merely observational, and stand up to scrutiny. The
   back while the AUD’s TWI         terms of trade are indeed down from Q3 2011’s peak, yet the RBA’s version of
  has not, but the anomaly is
                      modest        the AUD trade-weighted index made a new high in mid-February and currently
                                    sits little changed from there (Chart 1). Yet the decline in the terms of trade is
                                    quite modest. Q4 2011 export and import price indices suggest the terms of
                                    trade fell by some 4% in Q4, a reported change that may somewhat lag
                                    declines in iron ore and coal prices reported during Q4 (the two biggest
                                    determinants of terms of trade volatility). The gap between movements in the
                                    terms of trade and the currency are nevertheless modest (a few percentage
                                    points) albeit enough for Mr Stevens to say what he did. And since the
                                    beginning of this year, coal prices in particular have recovered somewhat while
                                    broader commodity price indicators, such as the CRB, have strengthened,
                                    suggesting that the terms of trade may not have declined much, if at all, thus
                                    far in 2012 (Charts 2 and 3).

  AUDUSD is trading close to        At the same time, other elements that fed our fair value estimations for
       fair value once non-         AUDUSD (e.g. rate spreads and risk sentiment proxies) suggest that the pair
 commodity price drivers are
                 factored in        currently sits very close to fair value at around 1.08. With regard to the
                                    apparent disconnect between RBA rate expectations and the currency, we
                                    have argued that this reflects both an exaggeration in ‘true’ market
                                    expectations for the likely scale of RBA easing (something the RBA has itself
                                    acknowledged) as well as the AUD assuming some reserve currency
                                    characteristics thanks to the security of Australia’s AAA sovereign status. This
                                    is reflected in a sharply rising share of foreign ownership of the outstanding
                                    stock of Commonwealth Government Securities, now running near 80%.
                                    Some caution is required though regarding the ongoing veracity of this demand.
                                    The projected move into fiscal surplus in the 2012-2013 Australian fiscal year
                                    (commencing 1 July) may start to impose supply limitations on the ability and
                                    willingness of non-residents to continue accumulating ACGS. This may then
                                    weaken one recent source of support for the AUD unless foreign investors are
                                    inclined to shift down the credit curve. The recent downgrades to three of the
                                    four big banks’ ratings offer reason to be cautious here.

     Chart 3: Coal, Iron Ore and AU Terms of Trade                  Chart 4: Manufacturing Growth vs., AUDUSD




Source: Reuters EcoWin Pro, BNP Paribas estimates             Source: Reuters EcoWin Pro

Thursday, 01 March 2012                                                                         Bloomberg BPFR <GO>
FX Weekly                                                7                     http://www.GlobalMarkets.bnpparibas.com
                                                                                   This publication is classified as non-objective research


 Ridout's objections to AUD        Ridout’s objections to AUD strength are more profound. She is implicitly
          strength are more        alluding to an Australian affliction with ‘Dutch disease’ whereby currency
                 profound…
                                   strength driven by the positive terms of trade shock from resource prices inflicts
                                   significant damage on the rest of the tradable goods sector. In the case of
                                   Australia, this is not just manufacturing (the sector decimated by the impact of
                                   the discovery and exploitation of natural gas in the Netherlands in the 1960s
                                   and 1970s) but also two key service export sectors – tourism and education.
                                   Together these two sectors account for some 15% of total exports.

      ..but the evidence that      The evidence for Dutch disease in Australia is limited. The contribution to GDP
 ‘Dutch disease’ is afflicting     growth from manufacturing has fluctuated between -0.5% and +0.4% q/q
  the Australian economy is
          thin on the ground       between the depths of the ‘Great Recession’ in 2008 and late 2011, but has
                                   been slightly positive for each of the last two reported quarters (Chart 4). The
                                   tourism sector, suffering under the stress of natural disasters as well as
                                   exchange rate strength, has yet to display evidence of a decisive downturn. On
                                   the contrary, the trend in tourism revenue remains mildly positive (Chart 5). In
                                   contrast, education services have undoubtedly been feeling the pinch of
                                   currency strength. The cost-benefit analysis of an Australian tertiary education
                                   seemingly tilting significant numbers of would-be graduates in favour of a
                                   degree elsewhere, the United States in particular (Chart 6).

       The longevity of the        While sectoral imbalances are probably being aggravated by AUD strength,
     resources investment          they are also being amplified by the lack of bank credit growth to the SME
     boom and strength of
   consumption also argue          sector, the blame for which it is hard to lay entirely on the resources boom
   against a policy reaction       (most of the investment in the resources sector is financed offshore). And on
                                   the expenditure side of the national accounts, it remains clear that consumption
                                   is continuing to maintain overall growth at somewhere close to trend, a fact that
                                   the RBA continues to stress in its economic commentary. The RBA also
                                   continues to stress that it expects the ongoing investment boom in the
                                   resources sector to last for many years to come. If it did not, it would be much
                                   more reasonable to expect that it would be inclined to take action to limit
                                   ‘hollowing out’ of the tradable good sector from exchange rate strength driven
                                   by what was seen as a temporary shock. Note too that at the 1.07 AUDUSD
                                   rate prevailing at the time of the last MPS forecasts, the RBA has inflation
                                   rising from mid-target towards the upper end of the inflation target late in the
                                   forecast horizon.

             Chart 5: Tourism Revenue vs. AUDUSD                      Chart 6: Education Export vs. AUDUSD




Source: Reuters EcoWin Pro                                    Source: Reuters EcoWin Pro

Thursday, 01 March 2012                                                                        Bloomberg BPFR <GO>
FX Weekly                                               8                     http://www.GlobalMarkets.bnpparibas.com
                                                                           This publication is classified as non-objective research


                             If the exchange rate were lower, the appropriate interest rate would almost
                             certainly need to be higher. Hence, the argument that households have
                             benefited from currency strength.

    If Chinese growth sees   Looking to the second half of 2012, we see a strong chance that RBA rate cut
 commodities strengthen in   expectations further reduce towards the current 4.25% cash rate (albeit any
  H2 2012 and the Fed does
QE3, AUDUSD should make      move by the banks to pass on higher wholesale borrowing costs would
                 new highs   undoubtedly add to chances the RBA will attempt to offset via a lower cash
                             rate). If our view on China pans out, with policy stimulus ensuring growth in the
                             order of 8.5% for 2012 overall, then the current anomaly between the terms of
                             trade and the currency might well be bridged via higher commodity prices.
                             When we layer on the view that the USD downtrend is not yet complete, we
                             remain comfortable with our view of AUDUSD appreciation back to/through the
                             July 2011 highs before 2012 is out.




Thursday, 01 March 2012                                                                 Bloomberg BPFR <GO>
FX Weekly                                         9                    http://www.GlobalMarkets.bnpparibas.com
                                                                              This publication is classified as non-objective research



Option Structures: Long AUDUSD

Rob Ryan                            We remain bullish AUDUSD targeting 1.1500 by year-end
+65 6210 3314                       Topside volatility is still cheap given depressed risk reversals.
                                    We refresh two existing bullish AUDUSD option recommendations
Joe Nash                            for consideration.
+44 (0) 207 595 8384
                Trade idea 1   Buy 31 Dec 2012 AUDUSD 1.15 European Digital with 1.0350 knock-out for
                               13.50% AUD [Tokyo Cut, Spot 1.0750]

                               Entry:           13.50%

                               Target:          50%

                               Stop:            None

                               Bid/Ask:         3% for AUD 1mio Payout

                               Option markets continue to price in a significant premium for AUDUSD puts,
                               despite little evidence that the risk reversal is working. Supply of vol on both
                               sides of the market means that the threat of a rapid collapse is probably
                               overstated in the absence of Greek default-type shock to global financial
                               markets. As such, topside volatility remains relatively cheap – while downside
                               implied volatility probably overstates the probability of a knock-out in our view.



                Trade idea 2   Buy a 2-month 1.0750/1.1050 1x2 AUDUSD Call Spread with KO at 1.0525 for
                               29.5 pips [Tokyo Cut, Spot 1.0750].

                               Despite the positive risk environment, risk reversals remain well bid for AUD
                               puts. This reduces the premium received for selling 1.1050 strikes; and indeed
                               means that the decay profile on a simple 1x2 Call Spread (without KO) is
                               unattractive - the likely return after one month on a grind higher in spot towards
                               1.10 is less than 2x initial premium. Adding the KO at 1.0525 improves the
                               decay - the KO impacts the pricing of the 1.0750 strikes much more than it
                               does that of the 1.1050 strikes - and suggests a return exceeding 3x initial
                               premium on a similar 1.10 target in a 1-month scenario.




Thursday, 01 March 2012                                                                   Bloomberg BPFR <GO>
FX Weekly                                           10                   http://www.GlobalMarkets.bnpparibas.com
                                                                              This publication is classified as non-objective research



FX Technical Analysis
Christian Séné                     Short term technical rebound in AUDNZD before medium term
                                   downtrend resumes
+33 (0)1 43 16 97 17
                                   GBPUSD positive outlook after triangle break, targeting 1.6114

     Chart 1: AUDNZD – The break above ST falling channel is turning study up. Possible reversal to be drawn

 Medium term view remains
 weak with the medium term
 falling “C of ABC” still under
 development from the
 61.8% retracement level at
 1.3233. The sharp move
 lower from 1.3233 within the
 short term channel supports
 this medium view with a
 target of 1.2688.
 Despite the medium term
 bias remaining heavy,
 AUDUNZD is currently
 testing this short term
 channel resistance at
 1.2857. Coupled with the
 potential bottom reversal
 pattern (bullish engulfing)(,
 the short term view is
 starting to turn positive,
 initialling targeting 1.2961.
 This would be seen as
 purely technical rebound
 before the medium
 downtrend is resumed.
                                                                                                        Source Bloomberg

         Chart 2: GBPUSD – Break above ST consolidative triangle opened way towards 1.6114 target area

 The break above the critical
 short term 61.8% (1.5810)
 and the key 1.5833 (short
 triangle resistance) open
 the way for a further mover
 higher in the short term. A
 decisive break above
 1.5929 top is now needed
 to open the way towards
 1.6114 target area and that
 1.6184.
 A move back below
 1.5810/33 to needed before
 the short term picture would
 turn bearish. The
 medium/long term supports
 remain at 1.5191 and
 1.5203 respectively. A
 break below 1.5191 is also
 needed before the medium
 term picture also turns
 bearish.




                                                                                                        Source Bloomberg


Thursday, 01 March 2012                                                                    Bloomberg BPFR <GO>
FX Weekly                                            11                   http://www.GlobalMarkets.bnpparibas.com
                                                                                   This publication is classified as non-objective research



FX Recommendations
                     New Trades                                                        Portfolio
We are re-entering a short USDJPY position with a             We continue to favour long positions in AUD and
stop at 82.50 with a target of 77.00 over the next 6-8        CAD. In our portfolio, these are expressed via a 2M
weeks. We also suggest an options trade to play for           USDCAD 0.98 digital, a 1.0725/1.1025 AUDUSD KO
a quick spot move lower. (See page 5 for further              Call Spread and a 1.15 year-end 1.15 AUDUSD
details)                                                      digital 1.0350 KO.
                    Closed Trades
No trades closed this week.                                   EURNOK has moved lower this week on strong
                                                              domestic data rather than by rising oil prices as in
                                                              recent weeks. EURNOK appears vulnerable to a
                                                              move higher once momentum fades while Friday’s
                                                              CPI data will be key to whether the Norges Bank will
                                                              soon cut rates. Entering our long EURNOK trade with
                                                              an oil hedge continues to appear attractive.




                                             Open Positions (Spot)
                                                                                                     Returns (%)
 Entry Date          Position          Entry Rate      Target Rate    Stop Loss         Weeks Held Spot Carry Total
                Long 5x EURNOK,
23-Feb-12                                 100             102.5           99                    1            -0.55 -0.02 -0.57
                 Long 1x Brent Oil
01-Mar-12         Long USDJPY            81.15            77.00          82.5                                0.04 0.00 0.04


                                            Open Positions (Options)
                                                                                                Return (% Premiums)
                                                                                                           % Return on
 Entry Date                                 Strategy                                          Current MTM
                                                                                                             Premium
              Buy 31 Dec ’12 AUDUSD 1.15 European Digital with 1.0350 KO                            10.9%
 9-Feb-12
              [14.5% off 1.0800]                                                                    [1.078]
              Buy 2M 1.0725/1.1025 1x2 AUDUSD Call Spread with KO at 1.0500                          54bp
 6-Feb-12
              for 23.5bp [Sport ref. 1.0725]                                                        [1.069]
                                                                                                 37.33%
 26-Jan-12 Buy 2M USDCAD 0.9800 digital [27% off 1.0015]
                                                                                                 [0.9845]
           Buy 3M 8.90 EURSEK call with a American KO at 9.50 for 0.69% (Spot                       0.47%
 19-Jan-12                                                                                                                     -
           ref. 8.80)                                                                               [8.81]
           Buy 2-month (21/23 March) AUDUSD ATMF (1.0330) Straddle at
 19-Jan-12                                                                                             -                       -
           12.50%
 05-Jan-12 Buy 6M GBPJPY vol vs Sell 12M EURJPY vol in equal vega amounts                           -0.5%                      -
              Long EURCHF forward vs. Short 1.2800 Call 6-month (13-Apr-12)                       -0.70%
 13-Oct-11                                                                                                                     -
              [Spot Ref. 1.2350]                                                                 [1.2050]




Thursday, 01 March 2012                                                                         Bloomberg BPFR <GO>
FX Weekly                                                12                    http://www.GlobalMarkets.bnpparibas.com
                                                                            This publication is classified as non-objective research



FX Recommendations (continued)

                                      Top G10 FX Trades Into 2012
                                                                                              Returns (%)
 Entry Date         Position       Entry Rate   Target Rate   Stop Loss          Weeks Held Spot Carry Total
15-Dec-11       Short USDJPY         77.90        70.00             -                 11.1            -4.13 -0.03 -4.17
                 Long Gold vs.
15-Dec-11                             100         107.5             -                 11.1            7.38 -0.14 7.23
                EUR,GBP, USD
15-Dec-11       Long EURCHF          1.2240        1.30             -                 11.1            -1.51 0.32 -1.19
15-Dec-11       Short EURJPY         101.4            95            -                 11.1            -6.52 -0.3 -6.82
15-Dec-11       Short EURGBP         0.8400       0.8000            -                 11.1            0.58 -0.27 0.31
15-Dec-11 EURSEK range trade, 8.50 -9.50 12M double no touch (6:1 payout)
15-Dec-11 Pay June 2012 AUD OIS vs. sell AUDUSD forward to 7 June 2012
See “FX Strategy Flash: Top 12 Trades Into 2012” for the details of these trade recommendations.




Thursday, 01 March 2012                                                                  Bloomberg BPFR <GO>
FX Weekly                                        13                     http://www.GlobalMarkets.bnpparibas.com
                                                                                                    This publication is classified as non-objective research



Market Sentiment and Positioning

James Hellawell                                         CFTC report shows investors continue to reduce their GBP short
                                                        exposure suggesting scope for further GBP strength.
+44 (0)20 7595 8485
                                                        Net JPY long position has been unwound substantially, providing
Steven Saywell                                          less support for USDJPY bulls from hereon.
                                                        Our indicators recommend long GBPJPY positions.
+44 (0)20 7595 8487
      CFTC shows investors                    The most important take away from the latest positioning and sentiment data
 continue to bail out of short                concerns the GBP. The latest CFTC positioning survey, reflecting positioning
  GBP positions- but there is
              room for more                   held as of 21 February, shows that “non-commercial” (a.k.a. speculative)
                                              investor sentiment for the GBP is slowing shifting in favour of GBP strength.
                                              Net short GBP positions continue to decline sharply over recent weeks from a
                                              near one year low of 70K contracts to 30K as of last Tuesday. Subsequent
                                              price action suggests that even this outstanding short has likely diminished
                                              further over the past week. This shift in positioning came almost entirely from
                                              short covering, given that overall net longs have changed little of the course of
                                              the week.

       Option-implied bullish                 The potential for renewed GBP buying is further highlighted by the fact that
  sentiment towards the GBP                   option-implied bullish sentiment towards the GBP continues to rise. The 3m
    continues to push higher
                                              GBPUSD 25-delta risk reversal chart (see chart 8) showed GBPUSD in an
                                              oversold position back in mid-November 2011 when GBPUSD puts were
                                              pricing 2.7 vols over calls (13.04% vs. 10.34%). Over the last few months we
                                              have seen the risk reversal bias turn bullish with puts now pricing only 1 vol
                                              over calls (8.65% vs. 7.64%)

Further short covering could                  Finally, our FX Client survey highlights GBP as having by far the strongest buy
    push GBP to fresh short-                  recommendation. Non-commercial investors are still increasingly moving away
 term highs against the USD
                                              from GBP short positions. Further short covering could push the GBP to fresh
                                              short-term highs against its US counterpart. Meanwhile, our forward looking
                                              proprietary indicator is also supportive of GBP gains and could potentially be

    Chart 1 : BNP Overbought / Oversold Indicator*                                     Chart 2 : BNP Momentum Indicator
   10                © BNP Paribas 2012 - All Rights Reserved                4                   © BNP Paribas 2012 - All Rights Reserved
    8
    6
    4
                                                                             2
    2
    0
   -2
   -4                                                                        0
   -6
   -8
  -10                                                                       -2
        NOK CHF AUD CAD GBP SEK EUR USD JPY                                      GBP NOK JPY CHF SEK USD EUR AUD CAD
          +8 equals strongest reading/-8 equals weakest reading
                                                                                         +16 equals strongest reading/-16 equals weakest reading
                 Previous weeks readings shown in grey




Source: BNP Paribas                                                       Source: BNP Paribas

*BNP Paribas FX BNP Overbought / Oversold Indicator are derived from our system of technical trading models and are designed to
provide an indication of the overall strength of individual currencies. Readings at extreme bullish or bearish levels have historically proved
to be good leading indicators of corrections or turning points in the underlying spot rate.


Thursday, 01 March 2012                                                                                        Bloomberg BPFR <GO>
FX Weekly                                                           14                        http://www.GlobalMarkets.bnpparibas.com
                                                                             This publication is classified as non-objective research


                                the biggest mover over the course of the week given the strong positive
                                momentum currently been generated.

   Positioning unwinding to     The JPY saw another sizable reduction in net long positioning this week. The
 drive the USDJPY higher is     recent decision to ease monetary policy from the Bank of Japan coupled with
  less supportive from here
                                the recent strong move in oil seems to have been the cause for a considerable
                                shift in sentiment towards the JPY. Last week net long contracts were reduced
                                from 29k to 17k, and the subsequent price action suggests that even these
                                residual short have been wiped out. With positioning now closer to neutral
                                levels, the potential for positioning-inspired squeeze higher in USDJPY has
                                fallen sharply. In the article on page 5 we reiterate our reasoning for our
                                bearish USDJPY view and have re-entered a short trade. Positioning supports
                                this view.

     BNP Paribas indicators     However, while we think the JPY will hold up against USD, our indicators
continue to flag bearish JPY    suggest scope for weakness in JPY versus other currencies. The BNP Paribas
                      signals
                                proprietary sentiment indicator remains biased to further JPY weakness (see
                                chart 1) and the JPY is still the overall weakest currency across our system of
                                models. This implies that although the JPY has weakened against the USD it
                                must have strengthened against the other major currencies in order to maintain
                                the balance and remain the overall weakest currency. The forward looking
                                indicator (see chart 2) gives no indication for any JPY support in the up coming
                                week given the relatively neutral reading in momentum.

 Indicators recommend long      The findings of our sentiment indicator conclude that a long GBPJPY position
          GBPJPY positions      should be attractive over the coming week.




Thursday, 01 March 2012                                                                   Bloomberg BPFR <GO>
FX Weekly                                            15                  http://www.GlobalMarkets.bnpparibas.com
                                                                                                                                        This publication is classified as non-objective research




       Chart 3: Positions as a percent of Open Interest                                                                  Chart 4 : Total Open Positions
                                                                                                      900000
 EUR
                                                                      01-Mar-12
                                                                                                      800000
 CHF                                                                  Last Week
                                                                                                      700000
GBP
                                                                                                      600000
 JPY
                                                                                                      500000
CAD
                                                                                                      400000
AUD
                                                                                                      300000
 NZD
                                                                                                      200000
       -60       -40        - 20         0            20        40            60          80             30-Apr-07       30-Apr-08         30-Apr-09       30-Apr-10    30-Apr-11



                       Chart 5 : EUR Net Positioning                                                                Chart 6 : EURUSD 3m Risk Reversal
 150000                                                                                   1.51        0.0

                                    +2 std. dev                                                       -0.5
 100000
                                                                                          1.46        -1.0                       +2 std. dev

 50000                                                                                                -1.5

                                                                                          1.41        -2.0
        0
                                                                                                      -2.5
 -50000                                                                                               -3.0
                                                                                          1.36
                                                                                                      -3.5
-100000
                         -2 std. dev
                                                                                          1.31        -4.0
-150000
                                                                                                      -4.5
                                                                                                                          -2 std. dev
-200000                                                                                   1.26        -5.0
    23-Feb-11           23-May-11         23-Aug-11        23-Nov-11               23-Feb-12           28-Feb-11         28-May-11             28-Aug-11          28-Nov-11         28-Feb-12

             EUR positions (net)                                              EURUSD                                                      EURUSD Risk Reversal


                       Chart 7 : GBP Net Positioning                                                                Chart 8 : GBPUSD 3m Risk Reversal
  80000                                                                                   1.68        0.0

  60000                                           +2 std. dev                             1.66
                                                                                                      -0.5
  40000                                                                                                        +2 std. dev
                                                                                          1.64
  20000                                                                                               -1.0
                                                                                          1.62
        0
                                                                                          1.60        -1.5
 -20000
                                                                                          1.58
 -40000                                                                                               -2.0
                                                                                          1.56
 -60000
                                                                                                      -2.5
 -80000           -2 std. dev                                                             1.54
                                                                                                                   -2 std. dev
-100000                                                                                   1.52        -3.0
    23-Feb-11           23-May-11         23-Aug-11        23-Nov-11               23-Feb-12           28-Feb-11         28-May-11             28-Aug-11          28-Nov-11         28-Feb-12

             GBP positions (net)                                              GBPUSD                                                      GBPUSD Risk Reversal



                       Chart 9 : CHF Net Positioning                                                               Chart 10 : USDCHF 3m Risk Reversal
 40000                                                                                    0.70        3.0
                                                                +2 std. dev                                              +2 std. dev
 30000
                                                                                          0.75        2.0
 20000
                                                                                          0.80        1.0
 10000

       0                                                                                  0.85        0.0

-10000
                                                                                          0.90        -1.0
-20000
                                                                                                      -2.0             -2 std. dev
                                                                                          0.95
-30000
                          -2 std. dev
-40000                                                                                    1.00        -3.0
   23-Feb-11           23-May-11         23-Aug-11         23-Nov-11               23-Feb-12           28-Feb-11         28-May-11             28-Aug-11          28-Nov-11         28-Feb-12
                                                                                                                                          USDCHF Risk Reversal
             CHF positions (net)                                          USDCHF



Source: Reuters Ecowin, CFTC



Thursday, 01 March 2012                                                                                                                           Bloomberg BPFR <GO>
FX Weekly                                                                                        16                              http://www.GlobalMarkets.bnpparibas.com
                                                                                                                                 This publication is classified as non-objective research


                   Chart 11 : JPY Net Positioning                                                          Chart 12 : USDJPY 3m Risk Reversal
 120000                                                                           75          1.0
 100000            +2 std. dev
                                                                                              0.5
  80000                                                                           77                           +2 std. dev

  60000                                                                                       0.0
                                                                                  79
  40000                                                                                       -0.5
  20000
                                                                                  81          -1.0
         0
 -20000                                                                                       -1.5
                                                                                  83
 -40000                                                                                       -2.0
 -60000                                                                           85
                                                                                              -2.5            -2 std. dev
 -80000                             -2 std. dev
-100000                                                                          87           -3.0
    23-Feb-11          23-May-11       23-Aug-11           23-Nov-11      23-Feb-12            28-Feb-11         28-May-11                28-Aug-11        28-Nov-11         28-Feb-12
                                                                                                                                   USDJPY Risk Reversal
              JPY positions (net)                                       USDJPY


                   Chart 13 : AUD Net Positioning                                                          Chart 14 : AUDUSD 3m Risk Reversal
100000                                                                           1.10         0.0
                                                         +2 std. dev                          -1.0                                +2 std. dev
 80000
                                                                                              -2.0
                                                                                 1.05
 60000                                                                                        -3.0

                                                                                              -4.0
 40000                                                                           1.00
                                                                                              -5.0

 20000                                                                                        -6.0
                                                                                 0.95         -7.0                          -2 std. dev
     0
                                                                                              -8.0
                                         -2 std. dev
-20000                                                                          0.90          -9.0
   23-Feb-11          23-May-11       23-Aug-11          23-Nov-11       23-Feb-12             28-Feb-11         28-May-11                28-Aug-11        28-Nov-11         28-Feb-12
                                                                                                                                    AUDUSD Risk Reversal
             AUD positions (net)                                       AUDUSD


                   Chart 15 : CAD Net Positioning                                                          Chart 16 : USDCAD 3m Risk Reversal
100000                                                                            0.93        5.0

 80000                                                                                        4.5
                                                   +2 std. dev
                                                                                  0.95
                                                                                              4.0
 60000                                                                                                            +2 std. dev
                                                                                              3.5
                                                                                  0.97
 40000
                                                                                              3.0
 20000                                                                            0.99        2.5

     0                                                                                        2.0
                                                                                  1.01
                                                                                              1.5
 -20000
                                                                                              1.0
             -2 std. dev                                                          1.03
 -40000
                                                                                              0.5                                      -2 std. dev
 -60000                                                                          1.05         0.0
    23-Feb-11         23-May-11       23-Aug-11           23-Nov-11       23-Feb-12           28-Feb-11          28-May-11                28-Aug-11        28-Nov-11         28-Feb-12

             CAD positions (net)                                       USDCAD                                                       USDCAD Risk Reversal



                   Chart 17 : NZD Net Positioning                                                          Chart 12 : NZDUSD 3m Risk Reversal
 30000                                                                           0.90         0.0

 25000                                            +2 std. dev                                 -1.0                       +2 std. dev

 20000                                                                           0.85         -2.0

 15000                                                                                        -3.0

 10000                                                                           0.80         -4.0

  5000                                                                                        -5.0

     0                                                                           0.75         -6.0
                                                                                                           -2 std. dev
 -5000                                                                                        -7.0
                                                   -2 std. dev

-10000                                                                          0.70          -8.0
                                                                                               28-Feb-11         28-May-11                28-Aug-11       28-Nov-11         28-Feb-12
   23-Feb-11         23-May-11        23-Aug-11          23-Nov-11       23-Feb-12
                                                                                                                                   NZDUSD Risk Reversal
             NZD positions (net)                                       NZDUSD


Source: Reuters Ecowin, CFTC, BNP Paribas




Thursday, 01 March 2012                                                                                                                   Bloomberg BPFR <GO>
FX Weekly                                                                                17                              http://www.GlobalMarkets.bnpparibas.com
                                                                            This publication is classified as non-objective research



Weekly Currency Summary

                                                    G10
                  USD reaction to Bernanke’s testimony suggests the market is doubtful on QE3 prospects.
                  Stronger US data especially ahead of a potentially strong NFP report next week could keep
                  USD bid even if risk is “on” in other asset classes. However, stepping back the reaction is
                  exaggerated (given the testimony is to give the FOMC committee members’ view), and
       USD        potential catalysts for the USD to weaken again could come closer to the FOMC (March 13)
                  or from Bernanke speeches (March 14 and 20).
                  We remain constructive on risk-appetite; though prefer funding our bullish commodity FX
                  bets in EUR into next week. While EUR crosses could come under pressure, EURUSD
                  should stay in a 1.3200-1.3400 range with upside risks should next week’s ECB meeting
       EUR        and statement from President turn out to be more hawkish on balance. A successful LTRO
                  and still sticky EZ HICP tilt risk in this direction.
                  Neither weak Swiss data, nor easing peripheral concerns in Europe have provided relief to
                  the CHF. Markets have been ignoring SNB rhetoric from acting Chairman Jordan. The SNB
                  next policy decision is on Mar 15th, but with Hildebrand's replacement having not been
       CHF        announced it may be difficult for speculation that floor will be raised to gain any traction,
                  leaving EURCHF in its low vol environment.
                  GBP still stands out strong within the G4, with the UK gilt market continuing to receive a
                  safe haven bid into the New Year. With survey indicators showing price pressures picking
                  up, it sides with view that the BoE will not pursue more QE. On a relative policy view point,
       GBP        GBPUSD has much scope to move higher multi-week (closer to Mar 13 FOMC meet). Till
                  then, can GBPUSD stay in a range; EURGBP could continue to remain under pressure.
                  We remain bearish USDJPY and reiterate our view that neither the trade deficit nor the
                  recent expansion of the BoJ’s asset-purchase programme is a valid reason for sending the
                  pair higher. We still expect QE3 will push USDJPY lower. We are re-entering a short
       JPY        USDJPY position with a stop at 82.50 with a target of 77.00 over the next 6-8 weeks.
                  We remain bullish CAD given ample liquidity and stronger US data, the latter placing it as a
                  top pick within the commodity bloc. However, CAD could be vulnerable to weaker readings
       CAD        in either Feb Ivey PMI (Tues) or employment data (Fri) in the week ahead.
                  Given still ample global liquidity and stronger data, we remain AUD bullish. We expect no
                  policy change from the RBA next week. However, following RBA Governor Stevens’ recent
                  concerns about the strength of AUD, the accompanying statement may warn that that the
       AUD        RBA is monitoring the exchange rate closely. Any pullback on such comment is likely to be
                  temporary. AUD will be sensitive to Thursday’s employment data release as well.
                  NZD should continue to hold up well with risk sentiment still positive post the ECB LTRO.
                  However, the RBNZ meeting this week (Thurs) could present some idiosyncratic risk should
       NZD        Governor Bollard try talk down the NZD. But dips remain a buy in our view.
                  NOK has been the top performing currency in recent weeks on the back of higher oil prices
                  and positive data (PMI and labour market). With oil and gas investment is expected to
                  accelerate by over 30% this year, NOKSEK should remain bid. Jan retail sales, Feb CPI and
       NOK        the ECB decision will set the tone this week ahead of the March 14 Norges Bank decision.
                  With a relatively data light week, SEK should track broader trends in risk appetite. Jan IP
                  data could influence SEK towards the end of the week. We look for SEK to continue to
       SEK        under perform the NOK and EUR.




Thursday, 01 March 2012                                                                  Bloomberg BPFR <GO>
FX Weekly                                           18                  http://www.GlobalMarkets.bnpparibas.com
                                                                              This publication is classified as non-objective research


                              Converging Europe, Russia, Africa and Israel
                  Better-than-expected Q4 GDP supports further gains for the zloty. The declines in
                  February’s inflation expectations and PMI reading, however, might be a concern for the less
                  hawkish MPC members of the NBP. Nevertheless, we expect NBP to leave the base rate
                  unchanged next Wednesday. Governor Belka’s statement will thus determine whether the
       PLN        zloty will be outperforming regional peers in the near term. We like to sell EURPLN on
                  spikes to 4.13.
                  Positive sentiment towards CZK assets prevails despite heightened volatility of the
                  exchange rate. The improved liquidity conditions still dampen Czech rates, but the increase
                  in the M2 money supply growth to 6.0% y/y will induce some paying pressure on the swap
       CZK        rates curve in the medium term. EURCZK is likely to break the support around 24.90, but
                  declines beyond 24.70 in the near term seem unlikely.
                  The rate cut discussed by the MPC members during the meeting when the NBH left rates
                  unchanged at 7.00% does not seem premature according to market reaction. The
                  improvement in February’s PMI also supports the sentiment, but the industrial production
                  growth next Wednesday is unlikely to provide a basis for further outperformance of the
       HUF        forint. EURHUF will probably test the support around 286 over the coming week, but we
                  would then buy the pair around this level.
                  Money supply growth in       Romania accelerating to 8.4% y/y slowly works through the
                  economy and might result     in a slight improvement of retail sales growth, January’s reading
                  for which is scheduled for   Friday. If the final numbers for Q4 GDP are revised higher than
       RON        the preliminary 1.9% y/y,     EURRON might be able to break the 4.34-4.36 range to the
                  downside.
                  Sunday’s Presidential elections in Russia keep the risk premium for RUB assets elevated,
                  but the global macroeconomic backdrop and the current oil prices should help the RUB to
                  outperform other high-yielding currencies such as the Turkish lira after the elections. Levels
                  around 17.05 are attractive for establishing new short positions in TRYRUB. We also
       RUB        remain long RUB through put spreads as we expect the political risk to decline in the
                  medium term.
                  The decline of February’s PMI to 49.6 is consistent with CBRT’s goal to slow down the
                  economic growth and is unlikely to be a concern that causes them to ease the liquidity
                  conditions much further from here. The PPI and the CPI on Monday are also unlikely to
                  have moderated in February, but a surprise to the downside could induce some steepening
       TRY        on the xccy curve. This backdrop also suggests that TRY will lag behind other EM
                  currencies in gains against the majors.
                  BoI stayed on hold as we expected on Monday, but their marginally accommodative stance
                  was communicated only by the staff’s forecast of rates averaging 2.2% in Q4. The record
                  low unemployment rate, however, will probably not allow them to cut rates further. We
       ILS        expect the shekel to reverse recent looses against the majors soon and would buy ILSCZK
                  at 4.90.
                  Various macroeconomic indicators showed that the economy is expanding at a moderate
                  pace and ZAR outperformed most other EM currencies. The SACCI and BER business
                  confidence indices on Wednesday and Thursday are likely to improve further and the help
       ZAR        the rand register more gains against the majors. We like to sell USDZAR above 7.50.




Thursday, 01 March 2012                                                                   Bloomberg BPFR <GO>
FX Weekly                                            19                  http://www.GlobalMarkets.bnpparibas.com
                                                                              This publication is classified as non-objective research


                                                    Latam
                  The currency war continues. BCB finally proved more aggressive on the USD purchases via
                  reverse currency swap auctions, where they bought USD 1.5bn this Wednesday. Today, the
                  government announced further FX measures to curb the BRL appreciation, extending IOF
                  tax on foreign loans bonds up to 3 years, from the previous 2 years. In our view, authorities
       BRL        will continue to defend the USDBRL from breaching the 1.70 handle. We are long USDBRL
                  via options.
                  Although the MinFin has been showing worries regarding the appreciation of the CLP, the
                  BCCh seems not to be uncomfortable with it. Meanwhile, the currency continues to trade in
                  tandem with the dynamics of the copper prices and our short-term model suggests CLP is
       CLP        actually fairly priced. We remain neutral
                  The 200-dma is proving to be an important support level for the USDMXN, which has been
                  trading around it for almost a month now. Giving the currency is the sole convertible
                  currency in Latam, it remains well exposed to external jitters. Therefore, although we like the
                  currency fundamentally – mainly with US activity surprising to the upside and the tail risk
       MXN        from EU been put aside – we do not want to be exposed to the volatility of the currency and
                  remain long MXN via options.
                  With the tax payment period for February over, coupled with the daily USD purchase
                  program extended, we could see some cash squeeze based on local banks USD cash
                  position, pressuring the COP. Nevertheless, USDCOP has been trading in line with the
       COP        external environment on a lower beta mode. We are long USDCOP.
                  The BCRP continue to buy USD aggressively to prevent further PEN’s gain. So far this year,
                  the CB has already purchased USD 3.7bn in the spot market, with USD 2.4bn of purchases
                  in February. We believe the monetary authority will maintain such an approach of
       PEN        buying/selling USD on the demand to smooth the trend on the PEN. We are neutral.
                  The government was able to issue around USD 15bn over the past year via
                  Venezuela/PDVSA. The issuance of sovereign bonds abroad by the government to feed the
                  markets with USD should continue at least until presidential election is past, just in October
                  2012. In that sense, the government was authorized by the National Assembly's finance
       VEF        committee to sell around USD 16bn in debt this year (between bonds in local currency and
                  US-denominated ones) without need of parliament's approval on conditions.
                  Nothing changed on our view regarding the ARS. The BCRA continues to buy back the
                  international reserves they sold last year, taking advantage of the diminished demand for
                  USD after all the restrictions imposed by the government to locals to buy USD – the latest
       ARS        on the importers, to also improve the trade balance for 2012. We expect the CB to continue
                  to intervene in a fashion to prevent a sharp depreciation of the ARS.




Thursday, 01 March 2012                                                                   Bloomberg BPFR <GO>
FX Weekly                                            20                  http://www.GlobalMarkets.bnpparibas.com
                                                                                This publication is classified as non-objective research


                                                      Asia
                   USDSGD traded within the 1.2420 to 1.2620 range. The failure to close below 1.2420
                   suggests range trading to persist with immediate resistance at 1.2560. We stay short
                   EURSGD entered at 1.6933 with a stop at 1.7020. Bank lending remains resilient and
       SGD         supports the MAS shifting towards a more modest appreciation of the SGD, likely through
                   flattening the bands with the centre unchanged.
                   USDMYR cracked the 3.0000 psychological support opening the 2.9600 level as offshore
                   offers outweighed onshore bids. We maintain our short USDMYR position entered at
       MYR         3.0250. Topside is likely to be capped at the 3.0200 trend line resistance.
                   USDIDR’s topside remains capped by BI selling between 9100-9150 while downside was
                   limited by onshore corporate month-end buying. A break of 9000 support is required for a
                   bearish break; else expect range trading of 8800 to 9200 to persist. February CPI printed
                   softer but there is heightened inflation risk given the intentioned hike in subsidized oil prices.
       IDR         BI minister said that 2012 inflation is likely to exceed 5.3% target and the BI may hike rates
                   if fuel prices lift inflation.
                   A wide trading range for the THB as it swing between good support at 30.20 and offers
                   above 30.50. The 200-day MA at 30.68 currently continues to offer a strong cap. A softer
                   than expected CPI print at 3.35% yoy in February illustrates the room for the BoT to
       THB         maintain its current monetary policy stance. We favour buying dips in the THB with a stop
                   above the 200-day MA.
                   The BSP cut benchmark rates by 25bp as the market expected, sustaining the bid to
                   Philippines stocks and bonds. The PCOMP broke above 5,000 briefly. Technically, the unit
                   has found a strong barrier at the 200-day MA, currently at 43.13. February CPI will be
       PHP         released next week, which will likely confirm the easier inflation picture and the support to
                   Philippine assets and the peso.
                   USDHKD spot traded in a tight range with a slight upward bias. Forwards continue to range-
                   trade with support from outright buyers below 7.7500 while CCS should stay firm on the
                   back of liability hedging flows due to local corporates’ USD debt issuance. PMI and FX
       HKD         reserves are due on 5 March and 7 March respectively.
                   We stay with our short 3M DF-NDF position entered at 250 pips with a target at par. A
                   bunch of monthly data such as CPI, industrial production and exports are due next week.
                   Sentiment is improving as manufacturing PMI continued rebounding in February. CNH
                   deposits declined in January after a fall in December and October on more channels for
                   cross-border RMB flows. USDRMB fixing rebounded after reaching a fresh low. Unwinding
       CNY         of long USD position was digested by oilers’ and month-end USD buying demand. It is
                   reported that Guangdong province may launch CNH loans and repatriation pilot programme
                   with an initial quota of RMB 30bn.
                   We see sentiment improve as February’s manufacturing PMI jumped above 50 to 52.7.
                   USDTWD spot traded sharply lower on strong equity inflows, breaking below the 29.50
                   level. We stay with our short 12Mx24M USDTWD NDF entered at -0.250 with a stop at -
       TWD         0.170 and a target is at -0.490. The CBC continued paying 1M to 3M FX swaps reportedly.
                   Data due next week includes CPI, FX reserves and external trade.
                   Korea posted a much stronger-than-expected industrial production in January and export
                   growth in February. The case for an insurance cut is therefore diminishing. Our economists
                   expect the BoK to hold policy rate unchanged next Thursday. USDKRW spot traded lower
                   on improving risk-taking sentiment but will consolidate in a range before breaking below the
       KRW         200-day MA at 1117 currently. FX reserves and bank lending are due on 5 March and 7
                   March respectively.
                   USDINR hung in a tight range of 49.00 to 49.50 as the liquidity tightness gripped the
                   markets, raising hopes of a 50bp CRR cut. India stocks found support as a result, but gave
                   back gains towards mid-week. NDF pips eased towards late-week as markets took heart
       INR         from easing oil prices and reduced bids for the USD. We see the unit remaining within its
                   range in the week ahead.
                   The VND remained steady as Viet stocks and bonds remained in favour as Vietnam’s macro
                   imbalances (high inflation and current account deficit) are improving. We see an opportunity
                   to leg into Viet bonds on an expected rate cut with the VND expected to remain steady in
       VND         the weeks ahead.

Thursday, 01 March 2012                                                                      Bloomberg BPFR <GO>
FX Weekly                                              21                   http://www.GlobalMarkets.bnpparibas.com
                                                                                              This publication is classified as non-objective research



Economic Calendar: 2 - 9 Mar
             GMT      Local                                                          Previous           Forecast             Consensus
Fri 02/03    23:30    08:30      Japan       CPI National y/y : Jan                       -0.2%               0.1%                -0.1%
             23:30    08:30                  Core CPI National y/y : Jan                  -0.1%              -0.2%                -0.2%
             23:30    08:30                  CPI Tokyo y/y : Feb                          -0.3%              -0.2%                -0.2%
             23:30    08:30                  Core CPI Tokyo y/y : Feb                     -0.4%              -0.4%                -0.4%
             23:30    08:30                  Household Consumption y/y : Jan               0.5%               0.2%                -0.9%
             23:30    08:30                  Unemployment Rate (sa) : Jan                  4.6%               4.5%                 4.5%
            (01/03)
             04:30     18:30       US       Fed's Williams Speaks in Honolulu
                      (01/03)
            07:00      08:00    Germany   Retail Sales (Real, sa) m/m : Jan         0.1%                        0.3%                   0.5%
            07:00      08:00              Retail Sales (Real, sa) y/y : Jan        -0.9%                        0.3%                   0.2%
            08:00      09:00    Eurozone EU Leaders Resume Summit Meeting in Brussels
            10:00      11:00              PPI m/m : Jan                            -0.2%                        0.5%                   0.5%
            10:00      11:00              PPI y/y : Jan                             4.3%                        3.5%                   3.5%
            09:00      10:00     Norway   Retail Sales (sa) m/m : Jan              -0.3%                        0.2%                   0.3%
            09:00      10:00              Retail Sales (nsa) y/y : Jan              2.6%                        6.8%                   2.6%
            13:30      08:30     Canada   GDP q/q Annualised : Q4                   3.5%                        2.1%                   1.8%
            13:30      08:30              GDP m/m : Dec                            -0.1%                        0.8%                   0.3%

Sat 03/03   01:00      17:00       US       Fed’s Bullard Speaks on US Economy in Vancouver
                      (02/03)

Mon 05/03   09:00     10:00       Italy      PPI m/m : Jan                                0.1%                  0.4%                     n/a
            09:00     10:00                  PPI y/y : Jan                                4.0%                  3.2%                     n/a
            09:00     10:00     Eurozone     PMI Services (Final) : Feb                 49.4 (p)                 49.4                   49.4
            09:00     10:00                  PMI Composite (Final) : Feb                49.7 (p)                 49.7                   49.7
            10:00     11:00                  Retail Sales (sa) m/m : Jan                 -0.3%                 -0.2%                  -0.1%
            10:00     11:00                  Retail Sales (sa) y/y : Jan                 -1.3%                 -1.6%                  -1.6%
            09:30     09:30        UK        CIPS Services : Feb                           56.0                  55.0                   54.9
            15:00     10:00        US        Factory Orders m/m : Jan                     1.1%                 -1.0%                   0.0%
            15:00     10:00                  ISM Non-Manufacturing : Feb                   56.8                  55.8                   56.6
            18:20     12:20                  Fed’s Fisher speaks on Economy in
                                             Dallas

Tue 06/03   00:30      18:30       US       Fed’s Fisher speaks on Economy in Houston
                      (05/03)
                                            Super Tuesday – Primaries in ten states including Texas
            03:30     14:30     Australia    RBA Rate Announcement
            10:00     11:00     Eurozone     GDP (Rev) q/q : Q4                         -0.3% (p)              -0.3%                  -0.3%
            10:00     11:00                  GDP (Rev) y/y : Q4                          0.7% (p)               0.7%                   0.7%

Wed 07/03   00:30     11:30     Australia    GDP q/q : Q4                                   1.0%                0.9%                     n/a
            00:30     11:30                  GDP y/y : Q4                                   2.5%                2.6%                     n/a
            08:00     09:00      Spain       Industrial Production (wda) y/y : Jan         -3.7%               -3.2%                     n/a
            09:00     10:00     Norway       Manufacturing Prod (sa) m/m : Jan             -0.3%                0.2%                     n/a
            09:00     10:00                  Manufacturing Prod (nsa) y/y : Jan             0.6%                0.3%                     n/a
            11:00     12:00     Germany      Factory Orders m/m : Jan                       1.7%                0.3%                   0.6%
            11:00     12:00                  Factory Orders y/y : Jan                       0.0%               -1.9%                  -1.8%
            13:15     08:15        US        ADP Labour Change : Feb                        170k                200k                   200k
            13:30     08:30                  Non-Farm Productivity (Final, saar)        0.7% (p)                0.8%                   0.8%
                                             q/q
            13:30     08:30                  Unit Labour Costs (Final, saar) q/q      -1.2% (p)              1.2%                 1.2%
            20:00     15:00                  Consumer Credit : Jan                   USD19.3bn          USD12.0bn             USD10.0bn
            14:00     15:00     Belgium      GDP (Rev) q/q : Q4                       -0.2% (p)             -0.2%                   n/a
            14:00     15:00                  GDP (Rev) y/y : Q4                        0.9% (p)              0.9%                   n/a




Thursday, 01 March 2012                                                                                  Bloomberg BPFR <GO>
FX Weekly                                                        22                     http://www.GlobalMarkets.bnpparibas.com
                                                                                            This publication is classified as non-objective research



Economic Calendar: 2 – 9 March (cont)
             GMT      Local                                                         Previous         Forecast             Consensus
Thu 08/03    23:50    08:50     Japan      Current Account (nsa) : Jan             JPY303.5bn       JPY-315.6bn           JPY-278.2bn
             23:50    08:50                GDP (Rev) q/q : Q4                         -0.6% (p)            0.0%                 -0.1%
             23:50    08:50                GDP (Rev) q/q Annualised : Q4              -2.3% (p)           -0.1%                 -0.6%
            (07/03)
             00:30    11:30    Australia  Unemployment Rate : Feb                        5.1%                 5.1%                     n/a
             00:30    11:30               Employment Change : Feb                        46.3k                 12k                     n/a
             06:30    07:30     France    Non-Farm Payrolls (Final, sa) q/q :        -0.2% (p)               -0.2%                     n/a
                                          Q4
            06:30     07:30               Non-Farm Payrolls (Final) y/y : Q4          0.7% (p)             0.7%                        n/a
            07:30     08:30               BdF Business Survey (Prel) : Feb                 96.3             96.0                       n/a
            07:45     08:45               Trade Balance : Jan                       EUR-5.0bn         EUR-4.8bn                        n/a
            08:15     09:15   Switzerland CPI m/m : Feb                                  -0.4%             0.3%                      0.2%
            08:15     09:15               CPI y/y : Feb                                  -0.8%            -0.9%                     -1.0%
            08:30     09:30      Neths    CPI m/m : Feb                                  -0.1%             0.7%                        n/a
            08:30     09:30               CPI y/y : Feb                                   2.5%             2.4%                        n/a
            11:00     12:00    Germany    Industrial Production m/m : Jan                -2.9%             1.0%                      0.9%
            11:00     12:00               Industrial Production y/y : Jan                 0.9%             1.1%                      0.6%
            12:00     12:00       UK      BoE Rate Announcement
            12:30     07:30       US      Challenger Layoffs : Feb                      38.9%
            13:30     08:30               Initial Claims                                 351k                  350k                    n/a
            12:45     13:45    Eurozone ECB Rate Announcement
            13:30     14:30              ECB Press Conference
            14:00     09:00     Canada BoC Monetary Policy Announcement

Fri 09/03    23:50    08:50     Japan      M2 y/y : Feb                                  3.0%                 3.0%                   3.0%
            (08/03)
             00:30    11:30    Australia   Trade Balance : Jan                     AUD1.71bn         AUD 1.50bn                   n/a
             07:00    08:00    Germany     CPI (Final) m/m : Feb                     0.7% (p)              0.7%                 0.7%
             07:00    08:00                CPI (Final) y/y : Feb                     2.3% (p)              2.3%                 2.3%
             07:00    08:00                HICP (Final) m/m : Feb                    0.9% (p)              0.9%                 0.9%
             07:00    08:00                HICP (Final) y/y : Feb                    2.5% (p)              2.5%                 2.5%
             08:00    09:00                Trade Balance (nsa) : Jan               EUR12.9bn         EUR14.1bn              EUR13.0bn
             08:00    09:00                Current Account : Jan                   EUR19.3bn
             07:45    08:45     France     Industrial Production m/m : Jan              -1.4%                 0.1%                     n/a
             07:45    08:45                Industrial Production y/y : Jan              -1.3%                -1.5%                     n/a
             07:45    08:45                Manufacturing Production (sa) m/m :          -1.4%                -0.3%                     n/a
                                           Jan
            07:45     08:45                Manufacturing Production (sa) y/y :           0.8%                -1.4%                     n/a
                                           Jan
            07:45     08:45                Budget Balance (Cumulative) : Jan       EUR-13.4bn         EUR-9.0bn                        n/a
            08:30     08:30    Sweden      Industrial Production (sa) m/m : Jan          0.0%              0.2%                        n/a
            08:30     08:30                Industrial Production (nsa) y/y : Jan         2.0%              0.2%                        n/a
            09:00     10:00     Spain      Retail Sales (Adjusted) y/y : Jan            -5.4%             -5.5%                        n/a
            09:00     10:00      Italy     Industrial Production m/m : Jan               1.4%             -1.5%                     -0.9%
            09:00     10:00                Industrial Production (wda) y/y : Jan        -1.7%             -1.5%                        n/a
            09:00     10:00    Norway      CPI (nsa) m/m : Feb                          -0.2%              0.9%                        n/a
            09:00     10:00                CPI (nsa) y/y : Feb                           0.5%              1.1%                        n/a
            09:00     10:00                CPI-ATE (nsa) y/y : Feb                       1.3%              1.4%                        n/a
            09:00     10:00                PPI m/m : Feb                                 2.2%              2.4%                        n/a
            09:00     10:00                PPI y/y : Feb                                 7.9%              9.1%                        n/a
            09:30     09:30       UK       Industrial Production m/m : Jan               0.5%              0.2%                      0.4%
            09:30     09:30                Industrial Production y/y : Jan              -3.3%             -3.2%                     -3.1%
            09:30     09:30                Manufacturing Production m/m : Jan            1.0%              0.4%                      0.3%
            09:30     09:30                Manufacturing Production y/y : Jan            0.8%              0.7%                      0.2%
            09:30     09:30                Input PPI (nsa) m/m : Feb                     0.5%              1.5%                      0.5%
            09:30     09:30                Output PPI (nsa) y/y : Feb                    4.1%              4.0%                      3.9%
            09:30     09:30                Output PPI (Ex-FDT, nsa) y/y : Feb            2.4%              2.7%                      2.5%




Thursday, 01 March 2012                                                                                 Bloomberg BPFR <GO>
FX Weekly                                                     23                       http://www.GlobalMarkets.bnpparibas.com
                                                                                                                 This publication is classified as non-objective research



Economic Calendar: 2 – 9 March (cont)
                GMT        Local                                                                      Previous              Forecast            Consensus
Fri 09/03       11:00      11:00       Portugal       GDP (Final) q/q : Q4                              -1.3% (p)               -1.3%                   n/a
(cont)          11:00      11:00                      GDP (Final) y/y : Q4                              -2.7% (p)               -2.7%                   n/a
                12:00      07:00       Canada         Unemployment Rate : Feb                               7.6%                 7.6%                   n/a
                13:30      08:30         US           Non-Farm Payrolls (Chg) : Feb                         243k                 225k                 211k
                13:30      08:30                      Unemployment Rate : Feb                               8.3%                 8.3%                 8.3%
                13:30      08:30                      Average Hourly Earnings m/m : Feb                     0.2%                 0.1%                 0.2%
                13:30      08:30                      Trade Balance : Jan                            USD-48.8bn            USD-48.3bn           USD-49.0bn
                15:00      10:00                      Wholesale Inventories m/m : Jan                       1.0%

Sun 11/03                            US, Canada Clocks go forward by one hour.

During          5-9/3                     UK          Halifax House Prices m/m : Feb                         0.6%
Week                                                  Halifax House Prices (3mth) y/y :                     -1.8%
                                                      Feb
                7-12/3                 Germany        Wholesale Price Index m/m : Feb                        1.2%
                                                      Wholesale Price Index y/y : Feb                        3.0%
Release dates and forecasts as at c.o.b. prior to the date of publication: See Daily Economic Spotlight for any revision            Source: BNP Paribas




Thursday, 01 March 2012                                                                                                    Bloomberg BPFR <GO>
FX Weekly                                                                    24                           http://www.GlobalMarkets.bnpparibas.com
                                                                                  This publication is classified as non-objective research



FX Forecasts*
USD Bloc             Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
EUR/USD               1.33     1.35     1.40     1.40   1.35     1.35     1.30        1.30          1.30         1.30          1.29
USD/JPY                76       75       72       72     73       75       75          80            80           85            85
USD/CHF               0.92     0.93     0.93     0.93   0.96     0.96     1.00        1.00          1.00         1.00          1.01
GBP/USD               1.62     1.63     1.65     1.65   1.59     1.59     1.55        1.55          1.55         1.55          1.55
USD/CAD               0.98     0.96     0.95     0.94   0.94     0.94     0.94        0.97          0.95         0.98          0.97
AUD/USD               1.06     1.10     1.12     1.15   1.12     1.10     1.10        1.05          1.05         1.00          1.00
NZD/USD               0.84     0.87     0.88     0.88   0.88     0.87     0.88        0.84          0.84         0.80          0.80
USD/SEK               6.88     6.74     6.51     6.43   6.67     6.67     7.02        7.02          7.02         7.02          7.21
USD/NOK               5.83     5.67     5.43     5.36   5.56     5.56     5.85        5.85          5.85         5.85          5.50

EUR Bloc             Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
EUR/JPY               101      101      101      101     99      101       98         104           104          111           110
EUR/GBP               0.82     0.83     0.85     0.85   0.85     0.85     0.84        0.84          0.84         0.84          0.83
EUR/CHF               1.23     1.25     1.30     1.30   1.30     1.30     1.30        1.30          1.30         1.30          1.30
EUR/SEK               9.15     9.10     9.12     9.00   9.00     9.00     9.12        9.12          9.12         9.12          9.30
EUR/NOK               7.75     7.65     7.60     7.50   7.50     7.50     7.60        7.60          7.60         7.60          7.10
EUR/DKK               7.46     7.46     7.46     7.46   7.46     7.46     7.46        7.46          7.46         7.46          7.46

Central Europe       Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
USD/PLN               3.23     3.04     3.14     3.00   3.19     3.22     3.31        3.15          3.00         2.96          3.06
EUR/CZK               25.0     25.5     24.8     24.1   24.5     24.0     23.5        23.3          23.1         23.0          22.8
EUR/HUF               298      282      290      285    285      283      287         282           285          280           275
USD/ZAR               7.45     7.00     7.65     8.00   7.65     7.50     7.40        7.20          7.81         7.68          7.74
USD/TRY               1.80     1.76     1.75     1.77   1.81     1.82     1.87        1.87          1.84         1.78          1.75
EUR/RON               4.35     4.39     4.35     4.29   4.33     4.35     4.35        4.37          4.35         4.33          4.25
USD/RUB              29.12    28.51    29.70    28.55  29.30    29.67    29.52       30.04         29.60        29.25         30.08
EUR/PLN               4.30     4.10     4.40     4.20   4.30     4.35     4.30        4.10          3.90         3.85          3.95
USD/UAH               8.0      8.0      8.0       8.0    8.0      8.0     8.0          8.0          8.0           8.0           8.0
EUR/RSD               109      104      100       95     98      100      100         102           100           99            95

Asia Bloc            Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
USD/SGD               1.26     1.25     1.25     1.24   1.23     1.22     1.21        1.20          1.20         1.20          1.20
USD/MYR               3.04     3.00     2.97     2.93   2.90     2.87     2.85        2.80          2.80         2.80          2.80
USD/IDR               8900     8800     8700     8600   8500     8500     8500        8500          8500         8500          8500
USD/THB              30.80    30.40    30.00    29.50  29.20    29.00    28.70       28.40         28.40        28.40         28.40
USD/PHP              43.00    42.00    41.00    40.00  39.50    39.00    38.50       38.00         38.00        38.00         38.00
USD/HKD               7.80     7.80     7.80     7.80   7.80     7.80     7.80        7.80          7.80         7.80          7.80
USD/RMB               6.28     6.24     6.18     6.12   6.05     5.98     5.93        5.89          5.85         5.80          5.80
USD/TWD              29.50    29.00    28.70    28.50  28.30    28.00    27.80       27.50         27.50        27.50         27.50
USD/KRW               1120     1100     1090     1080   1050     1050     1050        1050          1050         1050          1050
USD/INR              50.00    49.00    48.00    47.00  46.50    46.00    45.50       45.00         45.00        45.00         45.00
USD/VND              21200    21000    21000    21000 21000     21000    21000       21000         21000        21000         21000

LATAM Bloc           Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
USD/ARS               4.41     4.56     4.68     4.85   5.00     5.15     5.35        5.55          5.70         5.85          6.05
USD/BRL               1.74     1.71     1.68     1.64   1.66     1.68     1.70        1.71          1.73         1.74          1.76
USD/CLP               490      480      470       475    480      485     490          494          497           500           502
USD/MXN              12.60    12.20    11.80    11.40  11.45    11.53    11.70       11.90         11.95        12.00         12.05
USD/COP               1830     1770     1750     1755   1765     1785     1800        1825          1831         1838          1844
USD/VEF               4.29     4.29     4.29     4.29   8.80     8.80     8.80        8.80          8.80         8.80          8.80
USD/PEN               2.66     2.65     2.63     2.62   2.62     2.63     2.64        2.64          2.65         2.66          2.66

Others               Q1 '12   Q2 '12   Q3 '12   Q4 '12 Q1 '13   Q2 '13   Q3 '13      Q4 '13        Q1 '14       Q2 '14        Q3 '14
USD Index            78.13    77.09    74.79    74.68  76.95    77.23    79.45       80.38         80.23        81.12         81.48




Thursday, 01 March 2012                                                                    Bloomberg BPFR <GO>
FX Weekly                                             25                  http://www.GlobalMarkets.bnpparibas.com
                                                                                                                   This publication is classified as non-objective research



FX – Global Strategy Contacts
G10 Foreign Exchange
Ray Attrill                Head of FX Strategy North America              New York        1 212 841 2492        raymond.attrill@americas.bnpparibas.com
Steven Saywell             Head of FX Strategy Europe                     London         44 20 7595 8487        Steven.saywell@uk.bnpparibas.com
James Hellawell            Quantitative Strategist                        London         44 20 7595 8485        james.hellawell@uk.bnpparibas.com
Kiran Kowshik              FX Strategist                                  London         44 20 7595 1495        kiran.kowshik@uk.bnpparibas.com
Mary Nicola                FX Strategist                                  New York        1 212 841 2492        mary.nicola@americas.bnpparibas.com
Robert Ryan                FX Strategist                                  Singapore         65 6210 3314        robert.ryan@asia.bnpparibas.com
Michael Sneyd              FX Strategist                                  London         44 20 7595 1307        michael.sneyd@uk.bnpparibas.com
Emerging Markets FX & IR Strategy
Drew Brick             Head of FX & IR Strategy Asia        Singapore       65 6210 3262 drew.brick@asia.bnpparibas.com
Chin Loo Thio          FX & IR Asia Strategy                Singapore       65 6210 3263 chin.thio@asia.bnpparibas.com
Robert Ryan            FX & IR Asia Strategy                Singapore       65 6210 3314 robert.ryan@asia.bnpparibas.com
Jasmine Poh            FX & IR Asia Strategy                Singapore       65 6210 3418 jasmine.j.poh@asia.bnpparibas.com
Gao Qi                 FX & IR Asia Strategy                Shanghai     86 21 2896 2876 gao.qi@asia.bnpparibas.com
Bartosz Pawlowski      Head of FX & IR Strategy CEEMEA      London       44 20 7595 8195 bartosz.pawlowski@uk.bnpparibas.com
Dina Ahmad             FX & IR CEEMEA Strategist            London       44 20 7595 8620 dina.ahmad@uk.bnpparibas.com
Diego Donadio          FX & IR Latin America Strategist     Sao Paulo 55 11 3841 3421 diego.donadio@br.bnpparibas.com
Production and Distribution please contact:
Diana Seifert, Foreign Exchange, London. Tel: 44 20 7595 8486, Email: diana.seifert@uk.bnpparibas.com
Important Disclosures
Some sections of this report have been written by our strategy teams. These sections are clearly labelled and do not purport to be an exhaustive analysis, and
may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report. (Please see further
important disclosures in the text of this report). These sections are a marketing communication. They are not independent investment research. They have
not been prepared in accordance with legal requirements designed to provide the independence of investment research, and are not subject to any prohibition
on dealing ahead of the dissemination of investment research.
The information and opinions contained in this report have been obtained from, or are based on, public sources believed to be reliable, but no representation or
warranty, express or implied, is made that such information is accurate, complete or up to date and it should not be relied upon as such. This report does not
constitute an offer or solicitation to buy or sell any securities or other investment. Information and opinions contained in the report are published for the
assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgement by any recipient, are subject to
change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance
should not be taken as an indication of future performance. To the fullest extent permitted by law, no BNP Paribas group company accepts any liability
whatsoever (including in negligence) for any direct or consequential loss arising from any use of or reliance on material contained in this report. All estimates
and opinions included in this report are made as of the date of this report. Unless otherwise indicated in this report there is no intention to update this report.
BNP Paribas SA and its affiliates (collectively “BNP Paribas”) may make a market in, or may, as principal or agent, buy or sell securities of any issuer or person
mentioned in this report or derivatives thereon. BNP Paribas may have a financial interest in any issuer or person mentioned in this report, including a long or
short position in their securities and/or options, futures or other derivative instruments based thereon, or vice versa. BNP Paribas, including its officers and
employees may serve or have served as an officer, director or in an advisory capacity for any person mentioned in this report. BNP Paribas may, from time to
time, solicit, perform or have performed investment banking, underwriting or other services (including acting as adviser, manager, underwriter or lender) within
the last 12 months for any person referred to in this report. BNP Paribas may be a party to an agreement with any person relating to the production of this
report. BNP Paribas, may to the extent permitted by law, have acted upon or used the information contained herein, or the research or analysis on which it
was based, before its publication. BNP Paribas may receive or intend to seek compensation for investment banking services in the next three months from or in
relation to any person mentioned in this report. Any person mentioned in this report may have been provided with sections of this report prior to its publication
in order to verify its factual accuracy.
BNP Paribas is incorporated in France with limited liability. Registered Office 16 Boulevard des Italiens, 75009 Paris. This report was produced by a BNP
Paribas group company. This report is for the use of intended recipients and may not be reproduced (in whole or in part) or delivered or transmitted to any
other person without the prior written consent of BNP Paribas. By accepting this document you agree to be bound by the foregoing limitations.
Certain countries within the European Economic Area:
This report is solely prepared for professional clients. It is not intended for retail clients and should not be passed on to any such persons.
This report has been approved for publication in the United Kingdom by BNP Paribas London Branch. BNP Paribas London Branch is authorised and
supervised by the Autorité de Contrôle Prudentiel and authorised and subject to limited regulation by the Financial Services Authority. Details of the extent of
our authorisation and regulation by the Financial Services Authority are available from us on request.
This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment services provider by the Autorité de
Contrôle Prudentiel whose head office is 16, Boulevard des Italiens 75009 Paris, France.
This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main, regulated by the
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).
United States: This report is being distributed to US persons by BNP Paribas Securities Corp., or by a subsidiary or affiliate of BNP Paribas that is not
registered as a US broker-dealer to US major institutional investors only. BNP Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer
registered with the Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority and other principal exchanges. BNP
Paribas Securities Corp. accepts responsibility for the content of a report prepared by another non-US affiliate only when distributed to US persons by BNP
Paribas Securities Corp.
Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not
registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law
Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange
Law of Japan and a member of the Japan Securities Dealers Association and the Financial Futures Association of Japan. BNP Paribas Securities (Japan)
Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas
Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of
Japan.
Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France.
BNP Paribas Hong Kong Branch is regulated as a Registered Institution by Hong Kong Monetary Authority for the conduct of Advising on Securities [Regulated
Activity Type 4] under the Securities and Futures Ordinance.
Some or all the information reported in this document may already have been published on https://globalmarkets.bnpparibas.com
© BNP Paribas (2012). All rights reserved.


Thursday, 01 March 2012                                                                                                      Bloomberg BPFR <GO>
FX Weekly                                                                      26                           http://www.GlobalMarkets.bnpparibas.com

								
To top