Dollar Extends Post POMC Gains

Dollar maintains post FOMC gains and remains firm in Asian session today. Asian equities are broadly higher after DOW broke 13000 level to close at 13177, up 1.68%. Strong risk appetite sent Japanese yen lower but didn't impact the greenback so far. Dollar index is holding firm above 80 level. Gold breached recent low of 1662 overnight and is set to dip further. Among European majors, Sterling is relatively more resilient as supported by buying in crosses against Euro. Meanwhile, commodity currencies are steady in range.

As expected, policymakers delivered a more hawkish statement after the March FOMC meeting. Changes in languages in several areas indicated that the central bank has turned more confident in the economic outlook. This has in turn lowered speculations for further QE later this year. The Fed decided to left the Fed funds rate unchanged at 0-0.25% at least until late 2014 and to continue operation twist announced in September. The 'most hawkish' member Richmond Fed President Lacker dissented the decision as he believes that economic conditions are unlikely to warrant exceptionally low levels of the Fed funds rate through late 2014. More in Fed Turns More Hawkish As Economic Data Improves.

Separately, Fed said that 15 of the 19 largest financial institutions passed the latest stress test and had sufficient capital to withstand a severe recession. Under the testing scenario, unemployment could hit as high as 13% while house prices could drop as much as 21%, stocks could drop 50%. And in that cases, America's 19 largest banks could lose as much as $534b. But most of the banks would be able to absorb the losses as their collective capital was raised by more than $300b since 2009.

Fitch upgraded Greece's rating four notches from restricted default to B- and was assigned a stable outlook. Fitch said that the completion of the debt swap has "cured the rating default event" and the "distressed debt exchange and the losses imposed on bondholders have significantly improved Greece’s debt service profile and reduced the risk of a recurrence of near-term repayment difficulties on the new Greek government securities". However, Fitch also considers that significant and material default risk remains in light of the still very high level of indebtedness" and "profound economic challenges."

Chinese Premier Wen said that yuan is "possibly near a balanced level" and pledged to "step-up exchange rate reforms, especially in increasing two-way fluctuations". Earlier, PBoC Governor Zhou Xiao chuan said that the "closer the renminbi moves to an equilibrium level, the bigger role the market plays."

On the data front, Australian Westpac consumer sentiment dropped -5.0% in March. Japan BSI large manufacturing deteriorated to -7.3 qoq in Q1. UK job report and Eurozone CPI will be the major focuses in European session. Swiss will also release ZEW expectation. From US import price index and current account balance will be featured.