DXY Off Lows Amid Year End Flows; Thin Volumes Exacerbate Moves

A stronger US dollar was the main driver of price action in Asia, moves exacerbated by thin volumes heading into year end. The DXY has edged away from its newly minted cycle lows during Asia-Pac hours, which has applied some pressure to USD crosses. A pullback from intraday lows for U.S. real yields has allowed DXY to rise in Asia.

• AUD/USD down 25 pips at 0.7596 and dropping below the 0.76 handle. There is some concern in Australia around a mini resurgence of COVID-19 cases. Sydney reported 7 new cases in the past two days, which bought to an end around 5-weeks of virtually no cases and limited transmission in Australia's largest city.
• NZD/USD saw a similar move, down 23 pips at 0.7126. The December final ANZ Business Confidence rose to 9.4 from -6.9 previously, while the Activity Outlook rose to 21.7 from 9.1. The headline figure is at a 3-year high at these levels. The release had no effect on NZD.
• JPY saw some weakness heading into the BoJ decision. The bank kept rates on hold as expected, but tweaked its scheme focused on corporate liquidity provisions, extending its duration by 6 months, out to the end of September 2021 (meeting expectations), while noting that further extension will be considered if necessary. USD/JPY up 36 pips at 103.46, benefitting from a stronger greenback.
• GBP/USD fell, last down 60 pips at 1.3526. There has been no significant news flow, some of the weakness can be attributed to money coming off the table ahead of year end. There is still hope from some a Brexit deal can be reached, Ireland's Deputy Prime Minister Varadkar was the latest to weigh in saying both sides are edging towards a Brexit trade deal and he thinks both sides will want to get a deal by Christmas. However comments from UK Prime Minister Johnson were not so optimistic. He said the EU needs to substantially soften its stance on fisheries to secure a deal. European Commission President Ursula von der Leyen said there was progress big differences remain and noted fisheries as a sticking point. EU Chief Negotiator Barnier has proposed extending the deadline to Sunday.
• The PBOC strengthened the yuan by 47 pips at the fix, but this wasn't enough to stem the USD bid, USD/CNH up 90 pips at 6.5259 after brushing the 6.50 handle on Thursday.
• A fairly thin economic docket to end the week. UK Retail Sales and German PPI are both at 0700GMT while ECB Current Account data and German IFO Survey at 0900GMT.