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USD Extends Losses After Yellen's Remarks

FOREX

The greenback extended losses amid risk-on impetus generated by yesterday's testimony from U.S. Tsy Sec nominee Yellen, who backed U.S. Pres-elect Biden's stimulus plan and pushed back against any imminent tax hikes. A strong earnings report from Netflix released after U.S. hours lent further support to risk appetite. The DXY faltered through yesterday's worst levels, while G10 crosses were happy to hold tight ranges ahead of Joe Biden's inauguration as the new POTUS.

  • Firmer oil prices filtered through into commodity-tied FX space, supporting AUD, NOK & CAD against the U.S. dollar. The Aussie topped the G10 pile amid little in the way of local catalysts. AUD/JPY pushed higher for the second day in the row, but failed to test yesterday's high.
  • The PBOC fixed USD/CNY at CNY6.4836, around 47 pips lower than yesterday on greenback weakness, but 12 pips above sell side estimates. The central bank injected CNY278bn of liquidity, the second injection after a prolonged drain after year end. The LPR rates were left unchanged, in line with expectations.
  • South Korea said it will tighten FX monitoring of non-bank financial companies.
  • Coming up today we have inflation data from the UK, Canada & EZ, a monetary policy decision from the BoC and comments from Riksbank's Skingsley & BoE's Bailey.

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