Archived IMT (2010.03.18)

DEALER TALK OF a Fed DISCOUNT RATE HIKE TALK is pushing up USD, dragging down EURUSD to $1.3590. RATIONALE: Discount rate now at 0.75%, which is 50 bps above Fed funds and well below the 100-bps spread prevailing before the beginning of the easing cycle (Aug 2007 discount rate cut). Such reasoning helps address the question on why the Fed opted for an inter-meeting rate hike in February. The agenda of the Fed may have been to raise the discount rate by 25-bps in each of Feb, March and May (no FOMC scheduled in May as was the case in feb). EURUSD seen closing back below $1.36, testing $1.3570. USDJPY would retest 90.80. Watch ASHRAF TODAY LIVE ON CNBC CLOSING BELL FROM NYSE at 16:20 EDT (20:20 GMT).