MSP430F5529 launchpad UART RX flag not set

Im trying to communicate with my EXP430F5529 LP over backchannel UART (UCA1). The transmission from MSP to PC is working fine - it gets displayed in the Putty terminal. However, when I write a character in Putty, the UCRXIFG gets never set (when I halt the program with debugger, I can see it is stuck inside USCI_A_UART_receiveData polling for the UCRXIFG flag) - see the source code below.

SMCLK set to 1MHz, baudrate 9600

Im using MSPWare 1.90 Driverlib. Here is my source code:

void initClocks(uint32_t mclkFreq)
{
    // Assign the REFO as the FLL reference clock
     UCS_clockSignalInit(
	   UCS_FLLREF,
	   UCS_REFOCLK_SELECT,
	   UCS_CLOCK_DIVIDER_1);

    // Assign the REFO as the source for ACLK
    UCS_clockSignalInit(
	   UCS_ACLK,
	   UCS_REFOCLK_SELECT,
	   UCS_CLOCK_DIVIDER_1);

    UCS_initFLLSettle(
        mclkFreq/1000,
        mclkFreq/32768);

    //use REFO for FLL and ACLK
    UCSCTL3 = (UCSCTL3 & ~(SELREF_7)) | (SELREF__REFOCLK);
    UCSCTL4 = (UCSCTL4 & ~(SELA_7)) | (SELA__REFOCLK);

}

void transmitBytes(uint8_t* bytes,uint8_t size)
{
  for (uint8_t i = 0;i < size;++i)
  {
    USCI_A_UART_transmitData(USCI_A1_BASE,bytes[i]);
  }
}

int main( void )
{
    // Stop watchdog timer to prevent time out reset
   WDTCTL = WDTPW + WDTHOLD;
      
   // Set clock to 1MHz          
   initClocks(1000000);
   
   // Set LED and blink
   setupLEDs();
   blinkLED1(2);
   
   // Setup pins
   GPIO_setAsPeripheralModuleFunctionInputPin(
                GPIO_PORT_P4,
                GPIO_PIN4 + GPIO_PIN5
                );
   
   // Initialize UART (baudrate 9600)
   USCI_A_UART_initAdvance(USCI_A1_BASE,USCI_A_UART_CLOCKSOURCE_SMCLK,
                           104,0,1, USCI_A_UART_NO_PARITY,
                           USCI_A_UART_LSB_FIRST,USCI_A_UART_ONE_STOP_BIT, USCI_A_UART_MODE,
                           USCI_A_UART_LOW_FREQUENCY_BAUDRATE_GENERATION);
                           
     
   USCI_A_UART_enable(USCI_A1_BASE);
      
   uint8_t hello[6] = {'M','S','P','4','3','0'};
   transmitBytes(hello,6);

   while (1)
   {
      // Wait for incoming byte
      uint8_t recv = USCI_A_UART_receiveData(USCI_A1_BASE);
      blinkLED2(2);  // Blink led when data is received
     
      // Perform the received command
      if (recv == 'A')
      {
        blinkLED1(5);
      } 
      else if (recv == 'B')
      {
        blinkLED2(5);
      }
      else if (recv == 'C')
      {
        uint8_t hello[6] = {'H','E','L','L','O','!'};
        transmitBytes(hello,6);
      }
      else if (recv == 'Q')
      {
        break;
      }
   }
   
   // Close UART peripheral
   USCI_A_UART_disable(USCI_A1_BASE);
  
  
   return 0;
}

Im running Windows 7 with IAR. Of course, I set 9600 baudrate, stop bits, no parity, etc. in putty accordingly.

Also the RXD and TXD jumpers on my LaunchPad are in place.

Thanks for any hints!