Punish the Printers – A Faster Reversal Than Expected. Having reached some of our targets earlier
than anticipated, we have made some changes to our currency forecasts mainly centered around the EUR. P.4
CNY: Back in the Political Crosshairs. Recent comments from Obama signal a tougher US stance
toward the CNY currency regime — adding to a growing list of grievances between the two countries. Among the
key bilateral issues, CNY is perhaps the easiest to change. P.8
G10: Systematic Trades Update. Our systematic trading signals started off 2010 on a positive note. The combined
portfolio was up 0.2% in January. Going into February, the trading signals primarily recommend long positions in
NOK, AUD, CAD against short USD, JPY. P. 9
MXN: Scope for Further Appreciation. We have come back from a recent visit to Mexico more upbeat on the potential for MXN appreciation and looking for less upside pressure on long-end rates. P.11
CLP/COP: Take Partial Profits/Reduce Exposure. We recommend taking profit/reducing exposure to short CLP/COP positions, as the cross has broken down in the last two weeks. But we believe the medium-term rationale in favour of COP remains intact. P.13 Strategic Views Direction: We are bullish on the USD, especially vs the EUR.
Volatility: Although implied vols off, realized is dropping faster so value emerging. KRW, MXN and PLN vols are all getting into the sell zone Carry: AUD is the only currency that offers clear carry opportunities but not enough to counter our bearish bias. Correlation: The equity downturn has led
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