Dollar gains on Bernanke comments, RBA keeps rates on hold

The RBA left the interest rates unchanged at 4.75% for a fourth-straight time citing flood disaster and inflation concerns while adding that the level is 'mildly restrictive' and appropriate given the economic outlook. Additionally, the trade balance unexpectedly moved into deficit territory posting a shortfall of $212 million for the first time in almost a year as disruptions from natural disasters cut mining shipments and higher fuel prices boosted imports. New Zealand business confidence dropped to a two-year low in Q1 after the earthquake as most companies predict the economy will deteriorate over the next six months even as the RBNZ cut rates to help stability in the economy. The NZ Finance Minister English said that the nation may not have to lower borrowing costs any further as the business will rebound from the crisis.

Asian markets declined as radioactive water was dumped into the ocean and investors wary of the effect of such a move. The MSCI Asia Pacific index declined 0.9%, Nikkei down 1%, Topix down 1.48% while markets in China, Hong Kong and Taiwan remaining closed for a holiday and the S&P/ASX 200 Index rose 0.2% after the RBA left interest rates unchanged.

The Yen fell against most currencies on expectations that EU retail sales increased and US service sector expanded, reducing demand for safe-currencies. USDJPY reached a six-month high of 84.48 as Fed Chairman stated that inflationary pressures are increasing as commodity prices rise and that the Fed could take steps to control inflation. EURJPY increased to a 10-month high of 119.92 on speculation that the ECB would increase rates this week while the BOJ keeps rates near zero. AUDUSD dropped from yesterday's record high of 1.0474 to trade at a low of 1.0313 as the RBA kept rates unchanged, NZDUSD traded at 0.7696 highs as NZ Finance minister said that the RBNZ would not need to cut rates, GBPUSD traded at 1.6145 on expectations of house prices rising, Gold traded higher at $1440 on Japanese nuclear plant dumping radioactive water into the ocean and MENA region crisis while Oil traded lower at $108.

Service sector data from Germany, EU, UK and the US, Retail Sales from the EU and Fed members Plosser, Lockhart and Kocherlakota will speak today. The other important news would be the release of FOMC minutes of the rate decision meeting where not much of an impact would be felt as Fed voters have already been speaking on the economic outlook especially on the QE2.