Risk aversion took hold early on, setting.....>

FOREX: Risk aversion took hold early on, setting the tone of the session.

Weekend news flow brought renewed and intensified U.S.-China sabre rattling,

while shots were fired across the Korean DMZ. Participants flocked into safe

havens, driving JPY to the top of the G10 scoreboard, with USD and CHF also bid.

Liquidity was thinned by market holidays in China and Japan.

- Geopolitical concerns pushed USD/CNH higher, but the rate failed to establish

itself north of CNH7.1500 and sank back towards neutral levels. KRW took a hit,

catching up after the long weekend in South Korea. South Korean Y/Y CPI

inflation slowed more than expected to +0.1% from +1.0% in April.

- Risk-off flows amplified the impact of softening crude on oil-tied FX, with

NOK leading losses in the G10 basket. That said, CAD managed to shake off

earlier weakness and heads for the London session on a solid footing. USD/MXN

briefly showed above Friday's high, but also pared the bulk of gains.

- A flurry of M'fing PMI readings from across the world, as well as U.S. factory

orders and final durable goods take focus today. The ECB will publish its Survey

of Professional Forecasters.