From Inflation to Growth

FX Strategic Overview
Our call for the U.S. economic downturn to be longer and deeper than the markets currently expect leaves us still expecting further USD weakness in Q2 at least. The credit crisis is a major swing factor, particularly on the issue of when it has passed the worst point. Given the deteriorating fundamentals we are unconvinced by the latest rally in sentiment.

SCB FX Leveraged Model Portfolio
We continue to make respectable progress. Year to date, the SCB FX Leveraged Model Portfolio has a cumulative simple return of +9.47%. We currently hold one trade recommendation - short USD-SAR via 6M forward outright and are looking for other opportunities in Asia, Africa and G10.

SCB FX Real Money Portfolio
The SCB FX Real Money Portfolio remains positive year to date despite a recent setback in early April. It currently stands at +1.6% (non annualised) since re-entering positions based on our end Q2 forecasts.

Options Strategy
We look at three trade ideas in the Korean won (KRW), Indian rupee (INR) and Singapore dollar (SGD). We expect implied vol in the KRW curve to calm once the 9 April Parliamentary election is out of the way.

Corporate Hedger
Treasurers are becoming increasingly uneasy over market forecasting and volatility. We stress the importance of relative central bank hawkishness over inflation in driving the majors, particularly the Euro and the Australian dollar.

Correlations
We examine the evolution of the relationship between the Japanese yen (JPY) and other Asian regional currencies. With the Standard Chartered Risk Appetite Index now in risk averse territory, the pressure on the JPY from capital outflows has fallen.
FX Forecasts and Forecast Review pp. 10 - 11 We revised our broad USD call to expect a weaker USD throughout H1 and a temporary rebound in H2 2008. We also see some more INR strength in the very short term to help fight inflation.

FX Focus
CLP: Longer term upside for one of the world's best performing currencies year-to-date NGN: Strong balance of payments and portfolio inflows leave the naira well placed