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ANALYSIS-Wall Street braces for U.S. tax season liquidity test

Wall Street is bracing for possible stress in the currency markets by putting some cash aside ahead of the U.S. tax season, when large tax-related outflows could hurt market liquidity. The tax season culminates on April 15, when individuals file their income tax returns with the U.S. federal government, which typically leads to a drop in financial sector liquidity as individuals withdraw cash from bank deposits and money market funds to pay their taxes. Liquidity, as measured by the Federal Reserve's bank reserves and the Fed's overnight Riposte Ratio (RRP), the favored cash depository for money market funds, is still considered ample, but analysts say the high capital gains from last year's stock market boom could make this year's outflows particularly significant, which could lead to a spike in short-term interest rates.

STOCK MARKETS TODAY: Wall Street sinks on rate fears, Asian stocks fall

Asian stocks were mostly lower on Wednesday after Wall Street snapped its record bull run with its worst day in weeks. Hong Kong's Hang Seng Index fell 1.1% to 16,753.82, while Shanghai's Composite Heel Index dropped 0.2% to 3,070.04. Analysts said that despite recent relatively positive economic signs from China, there is growing concern that the sentiment that has panicked Wall Street could spread to Asia.
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