Greenback Gains On Fiscal Chatter

The greenback shook off its initial weakness and popped higher as a CNN piece suggested that U.S. Pres-elect Biden is set to propose a $2.0tn economic relief plan, with more details coming up later in the day. The DXY swung into positive territory, yet the U.S. dollar struggled to gain much traction against its G10 peers.

• Stimulus chatter helped generate light risk-on flows across G10 FX space, pushing the Antipodeans to the top of the G10 pile. JPY underperformed in the basket as hopes for U.S. fiscal package reduced demand for safe haven assets. The yen shrugged off uninspiring comments from BoJ Gov Kuroda.
• EUR/USD briefly ticked higher as a contact flagged demand from a macro account, but the shared currency failed to cling onto gains and faltered, with political risks in the Eurozone eyed.
• The PBOC fixed USD/CNY at CNY6.4746, weakening the yuan by 141 pips. Sell side estimates predicted a fixing some 22 pips weaker for the yuan, but it was much more in line than the 95 pip discrepancy yesterday which markets interpreted as a signal the PBOC were uncomfortable with too much strength in the yuan.
• KRW was comfortably the worst performer in Asia. USD/KRW rallied past its 50-DMA for the first time since Jun 2020 after rejecting that moving average on Tuesday.
• Today's data highlights include U.S. initial jobless claims, Swedish unemployment & German 2020 GDP. Central bank speaker slate features Fed's Powell, Kaplan, Bostic & Rosengren, ECB's de Cos & Riksbank's Ingves. The ECB will publish the minutes from its Dec MonPol meeting.