Moving back to average is much easier in Asia

After cutting interest rates from 7.25% to 3% over the Aug ’08 to Apr ’09 time frame to battle the credit implosion, the Reserve Bank of Australia continues to normalize policy. They raised rates 25 bps to 4% as they believe growth is “likely to be close to trend and inflation close to target over the coming year.” Helped by huge exposure to Asia “where financial sectors are not impaired,” allows policy to move closer to “average.” The US, UK, etc…, in contrast, won’t know back to “average” for years to come. Growing optimism that the Greek fire is flaming out for now ahead of this week’s details on more cuts has Greek CDS falling to a 7 week low to around 300 bps. After falling below 1.35 vs the US$ for the 5th day in the past 8, the euro is back above it thus making 1.35 a key short term line in the sand. Feb euro zone CPI rose .9% y/o/y, in line. Jan Japanese unemployment fell unexpectedly to 4.9%.

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