USD Struggles On China Equity Bounce, AUD Outperforms

The USD finds itself at the foot of the G10 FX table, with the move higher in Chinese equities flagged as the most obvious driver by most desks.

• Conversely the AUD sits at the top of the G10 FX performance table as it benefits from linkages to China, firmer-than-expected Q4 real retail sales data and a lack of meaningful dovish offerings from the RBA.
• On the positioning side Citi have noted that “while hedge funds are already long USD there is no sign yet that the leveraged positioning will be unwound. In addition, there could be ample USD buying from real money accounts, who have been on the sidelines holding net short USD positions and given their historical tendency to follow leverage flows.”