JPY Firms Up With Risk Rally Losing Steam

Asia witnessed a degree of reversal of yesterday's risk rally driven by optimistic news on the Covid-19 vaccine front. Regional players were happy to take profit in the wake of yesterday's price swings. Meanwhile, focus started moving back to uncertainty around U.S. presidential transition and concerns over the dragged-out U.S. stimulus talks, with questions re: longevity and distribution of a potential Covid-19 jab providing another thing to worry about. JPY easily outperformed all of its G10 peers, correcting its spectacular plunge seen yesterday. USD/JPY sank through its 50-DMA and established itself just below the Y105.00 mark.

• AUD, CAD & NOK traded on a softer footing as e-minis ground lower, signalling that yesterday's risk-on impetus is losing steam. NZD defied its commodity-tied peers and became the second-best performer in the G10 basket, with participants preparing for tomorrow's RBNZ MonPol decision.
• The greenback sat near the bottom of the G10 pile, with the DXY extending its pullback from Monday highs.
• Despite the initial uptick, USD/CNH swung to a loss and continued to lose altitude, paying little attention to the in-line PBoC fix & worse than expected Chinese inflation data.
• Focus turns to German ZEW Survey, UK labour market report, French & Italian industrial outputs and Norwegian CPI, as well as comments from Fed's Kaplan, Rosengren, Bostic, Quarles & Barainard and ECB's Knot.