Asian Market Update: Currency Strength, Housing Concerns Temper Early Equity Gains in Tokyo and Sydney; Sharp Dollar Selloff Following Fed's Arrival at QE Party Subsides, while Gold Retreats

- The Federal Reserve has jumped on the quantitative easing bandwagon in earnest, following the monetary authorities in Switzerland, UK, and Japan in expanding its balance sheet by over a trillion dollars. The Fed announcement of a plan to buy up $300B in long-term treasuries and $750B more in agency MBS sent a tsunami across the US financial markets and into Asia, reversing the weakness in US indices, sinking US treasury yields along with the greenback, and propelling gold from its intra-day lows by over $50. Living up to his moniker, "Helicopter" Ben added resolve to his toughening stance on halting disinflationary trend, joining the other monetary authorities looking to reflate their economies in a "competitive devaluation" party - a byproduct of the lingering financial meltdown. Notably, former Fed Governor Poole saw the Fed's latest response in buying $300B of treasuries "unnecessary", portending a difficult exit-strategy.

- In Asian bourses, the indiscriminate greenback crunch was felt most acutely in Tokyo, where export-oriented auto and electronics names traded modestly lower. Specifically, Sony was off by as much as 1.7%, while Honda and Toyota traded down by 3.5% and 2% respectively. The latter was also hurt by the Nikkei report that the company has cut its hiring plans for FY09 in half, reflecting the first time that the company has hired less than 2,000 full-time workers since 2002. In Japanese data, March Manufacturing Tankan registered a fresh record low at -78 v -74 prior, while the Services index also remained comparably weak at -37 v prior -39. Japan's Finance Minister Yosano welcomed the Fed into the QE club, noting that government debt buying would have a positive impact on long-term capital markets, while no.2 LDP politician suggested PM Aso is reluctant to call general elections as long as economic turmoil remains. The Nikkei came off its early session highs to trade down 0.6% coming out of midday break.

- The day's developments appeared to present Australia as the more attractive market on dollar-weakness inspired commodity strength, however poor Aussie housing data took the wind out of the S&P/ASX sails. Australia's Q4 Dwelling starts decline registered the largest drop since Q3 of 2000, falling by 9.9% above the upwardly revised Q3 contraction of 8.9%. Energy and gold-related commodity names were still firm on respective rallies, with Woodside Petroleum gaining 2.5% and Newcrest rising 3.6%. The broader ASX index traded up as high as +1.6%, but settled up by just over 1.0%. RBA Assistant Governor Edey spoke earlier in the session, urging more sweeping financial regulation to be undertaken on an international level amid expected further global weakness.

- Elsewhere in Asia, Hong Kong monetary authorities left base rates unchanged at 0.5% but chided the Fed's move, noting the US cannot maintain an easing policy for the long term. In South Korea, government officials were planning to allocate KRW4.9T of additional budget to create over 500K new jobs, while steel-maker Posco reportedly attracted $3B in demand in pricing a 5-yr bond fetching a yield of 9-9.5%. Hang Seng and Kospi both traded around unchanged levels after firm opening earlier in the day.

- In currencies, USD was sharply lower on the heels of the Fed announcement but selling has subsided somewhat in the Asian hours. EUR/USD traded off its highs around 1.3520 just above 1.3460, GBP/USD retraced about 100pips from 1.4320 highs, while USD/CHF ranged below 1.1450 after falling to pre-SNB intervention lows. Commodity FX was infused with extra bearishness, as AUD/USD rose above 0.68 before falling below 0.6750, and CAD preserved it strength below 1.25 vs USD. Japanese Yen has paused from its internally driven malaise in recent weeks, rising over two big figures to 96.00 from pre-Fed 98.00 levels.

- Crude oil prices are higher after declining by more than 1.5% at the end of the NY floor session.
Crude oil prices are gaining in Asia, as the Fed's decision to expand its purchases of certain debt securities led to a decline in the USD and higher commodities prices. In terms of oil supplies related news, the US Department of Energy disclosed that crude and gasoline inventories were higher than expected, while distillate supplies were less than expected (DOE CRUDE: +1.94M V +1ME; GASOLINE: +3.2M V -1.5ME; DISTILLATE: +112K V +600KE), during the prior week. With respect to OPEC, the Saudi Oil Minister Al-Naimi noted yesterday that he saw no need for further Saudi cuts in order to meet OPEC's compliance goal and that the previously agreed upon reductions are more than adequate to balance the energy market. Al-Naimi added that he expects oil demand to increase as soon as economic growth rebounds. In other oil related news, the April NYMEX crude contract expires tomorrow. Gold prices are currently lower on profit-taking, after the metal gained more than 3% yesterday following the Fed's interest rate decision. The SPDR Gold Trust ETF disclosed earlier today that its holdings of bullion rose by 15.3 tons to a new record of 1,084 tons as of March 18. This was the third time during the week that the ETF increased its holdings of gold to a new record level.