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from Counterparties:

MORNING BID – Pitfalls and switchbacks

This week profiles as one that contains a bunch of potential minefields that could challenge the market's prevailing view on what's to happen with major market-moving events.

The ECB meeting is one of the more obvious ones, what with investors expecting for some time that the euro would push higher and higher on the expectation of an improved outlook in the economic situation there.

That changed somewhat abruptly last week when Bundesbank President Jens Weidmann came out with some rather dovish comments that threw people for a loop. This looks like there could be some kind of situation where people are positioned against a rebound in the euro, only to be disappointed by the lack of action from the ECB should it go down that way.

The same can be said when it comes to events like Friday's jobs report. The market still has to try to suss out the likely reaction to this and weekly positioning figures that show the market's short position in five-year Treasury notes getting bigger than a week ago, as for other parts of the yield curve. A modest long position in two-year futures turned into a short position last week; long positions in the 30-year contract were trimmed, and investors extended short positions in the five- and 10-year area as well.

from Breakingviews:

Review: A world of reasons for the dollar to crash

By Martin Hutchinson

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

In “The Death of Money,” author James Rickards sees a world of reasons for the dollar to crash and the world monetary system to collapse. The greenback does indeed have dangerous adversaries, from China to al Qaeda. However, Rickards lets the Federal Reserve and budget deficits off too lightly as generators of trouble, and his solutions would cause yet more havoc.

from Counterparties:

MORNING BID – Janet Yellen’s rain (snow) check

This is the thing about delaying the new Fed chair's follow-up testimony by two weeks due to bad weather, you actually make the second hearing something that's potentially interesting. (It will depend, of course, on whether members of the Senate Committee ask provocative questions, and while you can lead a horse to water, well, you know.)

In the interim two weeks since Janet Yellen last appeared before Congress, the U.S. economic picture has gotten much more muddled. That's mostly because of poor retail sales and employment figures, and the out-of-control situation in Ukraine which has led to a regional flight of some assets. There's also been some interesting comments from the likes of Fed Governor Daniel Tarullo, who suggested the Fed should be paying more attention to the formation of asset bubbles and the use of monetary policy to curb them. That anyone is surprised at this shows how pervasive the "Fed put" option has become in the discussion of Fed activities, so we've really lowered expectations here.

from Breakingviews:

Whole FX business belongs in the dock

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By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

No one has yet been accused of a crime in the foreign exchange market, but there is a lot of talk of disturbing practices, including dealing in personal accounts against clients’ interests. This could be a scandal as big as the fixing of interbank lending rates. However, the probes seem unlikely to address the hardest questions about how the whole currency business works.

from Expert Zone:

Why the RBI raised interest rates

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The Reserve Bank of India (RBI) raised interest rates at its review on Jan 28. The justification usually given for doing so is inflation.

But at its previous review, when inflation had soared, the RBI was passive and left rates unchanged. Now, with wholesale price inflation (WPI) slowing to 6.16 percent, the RBI was quick to raise the repo rate by 25 bps back to its highest level since the 2008 crisis. Why?

from Counterparties:

MORNING BID – Emerging Markets, Apple, Ma Bell, and whatever else one can think of

In the words of Inigo Montoya, let me explain. No, there is too much. Let me sum up.

The market's most immediate issues remain tied specifically to what's going on overseas, particularly in Turkey. There, monetary authorities are meeting on a potential interest rate hike as a way of getting on top of the inflation problem (inflation's at 7.5 percent, and the central bank's lending rate is, uh, 7.75 percent).

from Counterparties:

Morning Bid: Dollar Bills and Dollar Bulls

The dollar’s performance hasn’t been anything to write home about in the last few years. It has weakened against major currencies like the euro and the Swiss franc, and been held back by lower interest rates thanks to the Federal Reserve’s triple-dose of quantitative easing, but there’s been a turn of late, though it’s too early to say whether it will have lasting power.

In 2013, the dollar was at least better than the yen, amassing a 35 percent move against the Japanese currency, which countered the Fed’s QE with Abenomics and a massive monetary dose of its own.

from The Great Debate UK:

Sterling destined for safe haven status (at least in the short term)

--Torben Kaaber is CEO of Saxo Capital Markets UK. The opinions expressed are his own.--

Sterling may not be a currency that investors immediately associate with safe haven status. Typically, safe havens in the currency world have been the triad of the U.S. dollar, the Swiss franc and the Japanese yen.

from MacroScope:

China at a crossroads on yuan internationalization project

As China marks the third anniversary of the first ever bond sale by a foreign company denominated in renminbi, questions are rife on what lies next for the offshore yuan market.

Since hamburger chain McDonalds sold $29 million of bonds on a summer evening just over three years ago, China’s yuan internationalization project has notched up impressive milestones.More than 12 percent of China’s trade is now denominated in yuan from less than 1 percent three years ago, Hong Kong – the vanguard of the offshore yuan movement – has more than one trillion yuan of assets in bank deposits and bonds and central banks from Nigeria to Australia have added a slice of yuan to their foreign exchange reserves.

from Expert Zone:

India Markets Weekahead: Cash is king

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Around mid-week, the Indian markets seemed akin to a sinking ship which saw unabated selling with Nifty hitting a low of 5,168 on Wednesday, before recovering sharply to close the week at 5,471 on the hopes of concrete action by the government to shore up the sentiments and the Reserve Bank of India’s moves to save the rupee.

The street expected structural reforms from the government to tackle this crisis whereas the textbook solutions of the RBI and the government backfired. The rupee cracked to touch 69/dollar, but recovered to close the week at 66.55.

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