NEW YORK ( BBH FX Strategy) -- The U.S. dollar is broadly higher paring some of its losses seen Thursday as asset reflation bumps up against fleeting technical momentum and mixed economic data.The euro is currently trading below 1.322 after steadily declining from 1.332. The dollar is rallying against the yen, up 0.5%, after Bank of Japan Governor Masaaki Shirakawa repeated the bank's commitment to achieve its 1% inflation target. Yet, he also noted that liquidity alone cannot defeat deflation. Sterling edged higher against the euro amid a combination of corrective euro action and underlying sterling support following a firm construction purchasing managers' index print. Asian stocks posted modest gains, leaving them close to seven-month highs with the MSCI Asia Pacific index up 0.3%. The EuroStoxx 600 is flat; banks shares are up 0.5%. Follow TheStreet on Twitter and become a fan on Facebook. Spain unemployment claims increased 112,269 in February, with total registered unemployed reaching 4.7 million and the pace of claims picking up. This comes after a pretty ugly fourth-quarter jobless rate of 22.9%, and points to further deterioration ahead.
The European Central Bank reported that overnight deposits surged to a record 776.9 billion euros on March 1, up from 475.2 billion euros a day earlier. This would appear to reflect hoarding of the 529.5 billion euros in three-year liquidity that was provided by the ECB earlier this week. However, balance sheet mechanics suggest this does not represent hoarding of LTRO cash since banks taking LTRO funds are different than the ones parking money at the ECB.
In China, one possible tangible outcome of the meetings would be a more explicit shift toward a looser approach to housing, in line with our view. Some local news reports overnight noted a sharp increase in real estate lending by China's for big banks, while others mentioned a proposal to be discussed at the CPPCC for as much as a 30% discount on mortgages for first-time homebuyers. Consistently, the Shanghai index closed 1.5% higher led by gains of nearly 4% in the real estate sector. In Russia, the protests did little to undermine Vladimir Putin's chances of winning the elections, but they may have a medium-term positive impact for the country as it pressures authorities to increase accountability. In the short term, however, the most likely outcome is that Putin will meet public discontent with increased fiscal spending. With oil prices still elevated and Russian fundamentals mostly on the strong side, we are inclined to view any selloff in Russia assets caused by post-elections protests as a buying opportunity.