Euro Retreats on Greece, Yen Surges

Euro pares some gains ahead of weekend as Greece and private sectors are still struggling to conclude a plan for the debt swap arrangement. IIF Chief Dallara said there was "some progress" after a two-hour meeting with Greek Prime Minister Papademos yesterday and work will continue today. Focus of yesterday and today was on legal and technical issues and the officials are aiming at completing the deal soon. It's believed that the major obstacle, the coupon, rate is "parked" for the moment and the group will finish details of the overall package first. It's also reported that ECB, despite its opposition, would be included in the deal to some extent. Greece is still targeting to submit its formal offer for the bond-swap deal by February 13, so as to meet the March 20 bond redemption deadline.

Meanwhile, the Japanese yen surges broadly today as Asian equities pares initial gain on profit taking after a week of strong rally. Also, the yen is likely pushed up by export led buying. Japanese Prime Minister Noda urged BoJ to take bold action to curb yen's gain but markets just ignored the repeated message. While the rebound in yen crosses this week, on risk appetite, was impressive, key resistance levels are still intact. Those levels are 78.28 in USD/JPY, 102.53 in EUR/JPY and 122.76 in GBP/JPY. The fall in USD/JPY since Wednesday is particularly steep even though USD/JPY is still held in recent range. We'd like to point out that DOW is close to key resistance level at 12876 and is vulnerable to a pull back. If that happens, USD/JPY might be dragged down through 76.55 near term support.

On the data front, New Zealand unexpectedly posted trade surplus of NZD 338m in December, versus expectation of NZD -50m deficit. Japan national CPI fall less than expected by -0.1% yoy in December but Tokyo CPI dropped more than expected by -0.4% yoy in January. Retail sales rose 2.5% yoy in December. Looking ahead, Eurozone M3 and Swiss KOF leading indicator will be released in European session. From US, main focus will be on Q4 GDP advance report, which is expected to show 3.0% annualized growth, comparing to prior 1.8%.