Asian And American Forex Update

Growing optimism seen from Fed Chairman Bernanke in early US session and subsequent after-hours strong draw from the US TALF program have been once again overshadowed in Asian hours by ominous uncertainty over the impending stress-test results for US financials. Whereas in the prior session it was the press speculation that as many as 10 banks may require additional capital, this time the scrutiny is being limited to Bank of America alone. However, the sheer size of the forecasted $34B capital raise request is translating into a more magnified bout of risk aversion across equity, currency, and bond markets than one seen yesterday. The prevalence of the Bank of America speculation calling for a raise of 50% of its market cap is also weighing heavier on sentiment, with the story appearing in NY Times and WSJ after the initial rumor surfaced on the wires around 9:30pmET. Asian bourses and US index futures reversed initial gains, trading around the session's worst level going into the final hour of the day. S&P/ASX was up 0.4% pre-BAC report but last seen off by 0.7% while Korea's Kospi was lower by 0.9% after a near 1% initial rally. Nikkei225 remains close for the final day of golden week. Taiwan's Taiex remained relatively immune to US financials worries, remaining at the forefront of regional gainers in recent sessions with another 2.7% rise to gain 16% in the last 4 sessions. In US equities, front-month S&P futures point to a lower open with a 1.2% session decline.

- Although market sentiment was simultaneously clouded by the Bank of America rumors, there were some notable rays of sunshine from two rounds of Aussie economic data. March retail sales saw their biggest rise in three months and their second-best increase in years with a 2.2% gain v 0.5% expected and -2.0% prior. Likewise, Australia March trade surplus was also second only to October in at least 3 years, coming in at A$2.45B V A$1.7BE. Surplus remained driven by contracting imports, but exports leveled off to unchanged. Most striking was Australia's export levels to its largest trading partner China rising by the highest margin of 23% in years to $4.35B, also the highest multi-month level. Australia's Finance Ministry and Treasury officials subsequently reflected on better than expected retail sales and trade data as evidence that the govt stimulus is working.