Private payrolls for August grew by +67k (cons. +40k), while the July reading was revised up significantly to +107k from +71k. The headline figure, still affected by the termination of Census-related employment, fell by only -54k (cons. -105k) while the July figure was also revised up to -54k from -131k. The unemployment rate ticked higher, as expected, to 9.6% (prev. 9.5%). UBS economists note that, although the economy continues to face headwinds and the unemployment rate is likely to remain stubbornly high, Friday's employment report is an important step in the right direction, and should weaken the case for additional quantitative easing on the part of Fed. We remain constructive on the US dollar into year-end on the expectation that US data will stabilize over the coming months, while the Eurozone, the UK and Japan, are likely to witness a moderation in economic growth. With US markets closed today, no US economic data is due.

Short term, the USD is likely to be sold against risk and we're looking for higher levels AUD, EUR and GBP against USD this week, with sentiment pushing the crosses higher. Further out, as US data stabilizes and equities pull back into a range, we will see modest USD recovery and look for the majors to lose ground against the USD. We will be sellers of EURUSD in the low 1.30's and sellers of AUDUSD between .9200 and .9400.

The market is currently highly correlated to risk, so USD is likely to be pushed by equity movements in this environment rather than yield seeking.

The BoJ is due to begin a scheduled two-day policy meeting today, with a decision due on Tuesday at approximately 03:00 GMT. We do not expect any policy developments to emerge, given that the board last met only a week ago when it voted to extend the BoJ's liquidity operations - both in terms of scale and maturity. Instead, attention will likely focus on Governor Shirakawa's post-meeting press conference, where he is likely to give his interpretation of the market's reaction to the BoJ's recent policy initiatives, and voice further concern on the yen's strength. Any possible suggestion from him that the BoJ is willing to consider further easing should lend some marginal support to USDJPY.

NZD: the earthquake in Christchurch should stimulate economic activity in the area. Consider it like a forest fire, the old buildings get shaken out and the town rebuilds using a fresh drop of funds from the government and any fair dealing insurance companies - about 2Bill dropped on the town should stimulate things. Buy a house there now and watch it rise in value as the local laborers get rich rebuilding the town.

Source: UBS, Bloomberg, Chris Lori