Thursday Morning FX commentary

Ccys have clawed back much of their o/n losses, but perceptions of a change in landscape is an overhang over much of recent weak-Dlr expectations.Ysty's late Dlr rally was a mixture of a reaction to the jump in US yields(plus wider implications of new mortgage hits)along with real money/corporate flow.The twist came with the Yen moves over past 12 hrs: 2007-2008 wud hv seen Yen strong and crosses moving south. Today was the opposite, as Jap investment trust, pension demand whipped and drove $/Jpy and the crosses higher. Latest Jap invest flow nbrs showed large jump in Jap foreign bond buying. Break of 96.00 set off macro buying as well. Cross action fairly uniform on the upside. Eur/Jpy's 50/200 ma cross last wk finally paid dividends as 133.50, then 134.50 offers finally taken out. Mkt now testing 134.85 May 11th high.New systems buying of $/Jpy near 97.00(targeting 98.32 cloud cover), plus macro buying of Nzd/Jpy abv 60 cts ( cross now abv previous double-top 60.35). All this has propelled Aud/Nzd.Cad back twds ysty's best lvls. NZ govt released budget tailor-made for rating agency approval and, sure enough,got an endorsement from S+P, crushing Aud/Nzd 2 big figs down to 1.25(50+100 day abt to cross lower). Eur, having staken out stops 1.3820-1.3790, now on upswing, thanks not only to Eur/Jpy, but also from usual ACB-type bids, now near 1.3860. Offers scattered 1.3890/1.3920 with short-term stops beyond. Eur/Gbp back abv .8700 despite Uk clearer Cable buy int in low 1.59 region. Eur nbrs mostly good, but mkt not trading off of these; rmrs of possible Baltic region devals hit the Scandies, despite v strong Sek ret sales(and better Nok unemployment). Dlr focus now switches to month-end expectations: thought to be Eur,Yen& Nok negtaive, possiby positive for Aud, Gbp and Cad.$/Latam opens within ystdy's range: ysty's brief $/Brl foray sub 2.00 brought out all sorts of local buy int. Eyes remain on $/Mxn, with tranches of stops abv 13.30.