Asian Market Update: Japan's Corporate Service Price Index Drops to Multi-Year Low; Aussie Banks Call for Lower Rates, while RBA Notes Progress in Semi-Annual Report; Latest Geithner Gaffe Showcases Greenback Vulnerability, as China Builds Case for Fiscal Responsibility in US Ahead of G20; Kiwi Rallies to Two-month Highs vs USD, AUD as RBNZ Squashes Rumors of Emergency Meeting

- Asian bourses are showing much of the same reluctance to maintain an outright bullish sentiment as seen over the course of the US session and the prior day, with indices see-sawing from negative to positive for second consecutive session. Uncertainty over next quarter's earnings with just weeks ahead of the start of the next season appears to be weighing on investor psyche even as US and foreign officials step up measures to fix the financial system meltdown. Nikkei225 and Kospi entered the final hour up 1% and 0.5% after opening lower, S&P/ASX closed up just 1%, and front-month S&Ps also gained just over 1%. Shares of Sony and Elpida led the charge in Tokyo, with the former gaining on Bank of America upgrade and the latter spurred by an equity raise of its units and a bullish sector call from a competitor in Korea. Earlier, Hynix said the chip industry bottomed in Q4. In other notable Nikkei names, Fuji Electric was boosted on rumored plans to merge its power supply unit with TDK.

- Economic calendar was fairly light in Asian hours, as New Zealand put out a Q4 current account figure in line with estimates and Japan served up a reminded of economy staring down the barrel of deflation with a worse than expected -2.6% corporate service price index - the worst decline in seven years. Note, in prior session, BOJ Governor Shirakawa suggested that deflation was not yet a threat but required close monitoring. Reserve Bank of Australia released its semi-annual Financial Stability review, assuaging investors that banking system was soundly capitalized with bad assets seen at just about 0.5% of FY09 total assets. Furthermore, RBA noted that housing credit was still expanding even as more sector weakness was possible in the coming year. Meanwhile, Westpac joined ANZ Bank's call for lower cash rates seen in the prior session, while also forecasting a shallow recession for Aussie economy in 2009. RBA's Head of Economic Analysis Richards spoke earlier in the day, reflecting on prior rate cuts having a positive impact on the economy by lowering mortgage rates amid improved housing affordability, even as jobless rate was still expected to rise. In Aussie share-specific developments, Rio Tinto CFO sparked some selling announcing alternatives to a failed Chinalco deal to include debt restructuring, asset sale, and rights issue, even though he was confident that would be a much less likely outcome. Additionally, he saw a regional economy close to its bottom, helped by "enormous" stimulus package from China and the possibility of a rebound in metals prices by the second half of 2009.

- Currency volatility was on display earlier in the US after a wire misquoted Treasury Secretary Geithner's vaguely stated opinion on SDR alternative to USD as world reserve currency. Just months after trying China's patience with more vagueness on its role as currency manipulator, Geithner appeared to kowtow to the recent jawboning on the safety of its Treasury holdings with an open-ended "consideration" of SDR alternative. The event appeared to backfire however, not only with kneejerk dollar weakness but also with more rhetoric from China's Finance Minister calling for greater international monetary coordination for currency stability coming at a politically sensitive pre-G20 moment. The greenback subsequently ranged against the majors in Asian hours, unable to breach intra-session lows vs the EUR at 1.3620 and GBP at 1.4620. Japanese Yen lows were contained at 0.98 vs USD and 133 vs EUR. In commodity FX, AUD/USD hugged the 0.70 handle and USD/CAD reversed its decline at intraday support of 1.2280. Kiwi Dollar appeared to be the preferred currency in play, rising to 2-month highs against USD above 0.5770. The rally was reportedly sparked by triggered stops against the Aussie, with AUD/NZD breaching noted key technical resistance turned support at 1.2270 after falling below the 100-day EMA at 1.23. Earlier, RBNZ denied rumors of emergency meeting speculated to address heightened volatility in debt markets.

- Crude oil prices are higher after declining by more than 2%, during the NY floor session. The NY decline in oil prices came as the US Department of Energy disclosed that last week, crude inventories were higher than expected. However, oil prices have since rebounded in line with the gains being seen in most Asian equities indices. Spot Gold prices are lower in Asia, after gaining during the NY session. The NY gains in gold prices came as the USD was sold against the Euro, as markets continue to debate the status of the dollar as the global reserve currency. In terms of future direction for gold, some market players see the moves by global central banks related to quantitative easing, the trading of US banks and the outlook for the dollar as key for gold prices. Another recent driver for gold prices has been investment flows, which have been led by the SPDR Gold Trust ETF. On today's session, it was disclosed that the ETF's holdings of gold remained unchanged at a record 1,124.9 tons as of 3/25, after rising by 11 tons on 3/24.