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Greenback Rally Pauses

FOREX

US dollar strength has taken a breather in Asia on Tuesday, while risk sentiment in the region is mixed.

  • The greenback continued to strengthen on Monday, driven by higher real yields and political theatre in the US with US House Speaker Pelosi saying last night the House intends to bring impeachment action against Trump this week. US stocks finished in the red.
  • AUD & NZD are both higher, moving alongside equity indices in the region. AUD/USD hovers around the key 0.77 level, while NZD/USD looks to make a challenge of 0.72. Headline flow from the region has been thin, New Zealand did announce plans to tighten coronavirus detection measures for travellers.
  • JPY is broadly flat. Trade data today from Japan showed November's surplus rose to JPY 616bn against JPY 474bn expected, but lower than the JPY 971 in October. Bank lending data was also released which showed bank lending excluding trusts rose 5.9% in December, in line with October.
  • The PBOC drained a net CNY 5bn from the system today, and fixed USD/CNY at 6.4823 around 59 pips higher than yesterday. The PBOC has weakened the yuan 115 pips so far this week. Chinese equity markets are lower today as risk sentiment takes a hit after losses yesterday. Something to keep an eye on though, 1 month CNH implied volatility has risen to 5.375%, the first gain in 4 days.

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