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    Asian Session – Oil rebound helps market sentiment; dollar firm but off highs

    Asian stocks moved higher on Monday following a 10% rally in crude oil prices on Friday. The prospect of increased demand in oil as a result of the cold snap in large parts of the northern hemisphere pushed oil prices away from the 12-year lows seen in the middle of last week.

    US crude futures climbed above $32 a barrel late on Friday before slipping just below it in late Asian session.

    The US dollar was off highs today, easing to 118.51 yen, though the markets were still in risk on mood. Weaker-than-expected trade data had limited impact on the yen.

    Exports from Japan fell by 8% year-on-year in December against estimates of a 6.8% decline. Imports also dropped by a bigger-than-expected amount of 18% year-on-year versus forecasts of a 16.4% fall. Meanwhile, speaking at Davos over the weekend, Bank of Japan Governor, Haruhiko Kuroda reiterated that the Bank won’t hesitate to adjust policy if necessary to meet the 2% inflation target. But, while acknowledging some weakness in inflation expectations in Japan, he did not comment on the Bank’s intentions at the upcoming policy meeting at the end of the week.

    The rebound in oil prices helped commodity-linked currencies recover from their recent lows. The Russian ruble, which fell to record lows last week, was back below 80 rubles per dollar at 77.71 in late Asian trading today. The Canadian dollar also gained sharply but was below highs and last trading at 1.4190 per US dollar.

    The Australian dollar was testing the 0.70 handle against the greenback in late Asian trading after it was given a lift from the NAB business conditions survey that showed confidence remained resilient during December. But the aussie slipped to 0.6991 in late session, while the New Zealand dollar also came off its peaks to ease to 0.6489.

    The euro started the day below 1.08 dollars but climbed to 1.0815 dollars as European markets opened. The pound held on to Friday’s gains and was steady at 1.4257 dollars despite disappointing retail sales figures on Friday.

    The rest of the day is expected to be relatively quiet in terms of data with only the German Ifo business confidence survey likely to attract any attention.

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