TheFXSpot: Spring Is In the Air; Mkt Embraces Risk Appetite 10  MAR   By Vicki Schmelzer NEW YORK, March 10 - Several days of fifty-degree weather in New York City, combined with increased belief in a global recovery -- aided by Chinese trade data -- led market players to embrace risk appetite Wednesday, traders said. By Vicki Schmelzer NEW YORK, March 10 (MNI) - Several days of fifty-degree weather in New York City, combined with increased belief in a global recovery -- aided by Chinese trade data -- led market players to embrace risk appetite Wednesday, traders said. However, while some flirted with key resistance levels in stocks and currencies earlier, there was a lack of followthrough, and players pared back positions once it became clear there was a lack of upward momentum. The S&P 500 rose to a high of 1148.14 and came within striking distance of the 2010 high of 1150.50, seen January 19, but then slipped lower. Dollar-Canada dipped to lows near C$1.0216, a bit below the 2010 low of C$1.0222, seen January 15, and then rebounded. Dollar-peso fell to Mxn12.5903, not far from Mxn12.5644, the 2010 low seen January 11, only to bounce higher subsequently. The S&P 500 held at 1147.06 Wednesday afternoon, in the middle of a 1140.32 to 1148.14 range. Dollar-Canada was trading at C$1.0252 and dollar-peso was trading at Mxn12.6125. Overnight, Chinese trade data showed that exports rose 45.7% and imports rose 44.7% year-on year in February, versus +21.0% and +85.5% in January. With imports and exports still solid, despite recent central bank tightening measures, market players plowed back into commodities. Spot gold was trading at $111.50/oz Wednesday, on the low side of a $1103.85 to $1127.75 range. The earlier break above Tuesday's high at $1124.30 emboldened the market to try a long position, a strategy players later regretted since gold failed to press higher. Commodity players awaited remaining Chinese data (CPI, PPI, retail sales, new loans, M2), most of which are set for release Thursday. "Chinese data is important, especially if the CPI number is pretty high," said Meg Browne, senior currency strategist at Brown Brothers Harriman. If CPI is above the 2.5% expected by the market, players may begin to think that Chinese rate hikes could be moved forward. "If the data makes people think that the PBOC will tighten, it will help to put a cap on the euro," Browne said. In mid-January, risk appetite quickly turned into risk aversion in response to the People's Bank of China raising reserve requirements and implementing other monetary policy measures seen as tightening rates. FX, stock and commodity markets reacted negatively, with prices slipping sharply and the dollar rising in the weeks that followed, traders reminded. Not helping risk matters either was a new proposal to limit high-risk speculation or "proprietary trading," put forward by five Democrat senators Wednesday. "The Protect our Recovery through Oversight of Proprietary Trading Act (or PROP Trading Act)" would bar "banks, bank holding companies, and their affiliates and subsidiaries from engaging in high risk speculation involving any stock, bond, option, commodity, derivative, or other security or financial instrument. Also bars those entities from investing in or sponsoring a hedge fund or private equity fund." In addition, the bill "requires large, important non-bank financial institutions to set aside additional capital to discourage them from engaging in high-risk speculation and investing or sponsoring hedge funds or private equity funds. The bill also puts strict limits on the amount of such speculation.' The PROP Trading Act would also prohibit "securities brokers from betting against the packages of loans (asset-backed securities) they are promoting to their clients." Looking ahead, in addition to Chinese data, the market awaits Bank of Korea and Swiss National Bank decisions Thursday. In Korea, BOK Governor Lee Seong Tae will chair the meeting for the final time before his term expires at the end of March. The market looks for the BOK to keep the benchmark base rate on hold at 2.0%, "in large part, reflecting the view that government opposition to any move will prove decisive," said strategists at RBC Capital Market. Only a few weeks ago, Governor Lee told legislators that a rate hike is "not far away," the strategists remind. Lee appears to be a "hawk in a cage" in recent months, voicing concern about potentially rising inflation to come as well household debt, property prices and "risks associated with keeping rates low for too long," they said. His replacement will likely find it hard to raise rates in the first few months of his/her term, which means that Governor Lee may try to convince other MPC members that tightening now is appropriate. "If Governor Lee is really a hawk, tomorrow will be his last chance to escape the cage," the strategists said. In Europe, the SNB is not expected to adjust the three-month LIBOR target rate (range from 0.0% to 0.75%) at Thursday's quarterly meeting. Nevertheless, close attention will be paid to any currency centric commentary in the accompanying statement, UBS strategists said. "Interventionist rhetoric, especially from SNB Deputy Chairman Jordan has softened considerably in recent weeks," they said. "Furthermore an article in the WSJ last week saw SNB Chairman Hildebrand emphasize the importance of inflation targeting, suggesting inflationary rather than deflationary concerns are beginning to take precedence," UBS noted. While euro-Swiss has been rangebound in the last week, UBS looked for the cross "to remain heavy" in coming months, "as delveraging by Swiss banks leads to franc-positive repatriation." Euro-Swiss closed at Chf1.4612 Wednesday, after trading in a range of Chf1.4612 to Chf1.4630. ** Market News International New York Newsroom: 212-669-6430 ** [TOPICS: MNEF01] 3/10/2010 2:30:00 PM