• Commodities weakened during US trading as markets absorb the second tightening action by the PBOC in as many weeks; today reserve requirements, last week 3-mo bill rates
  • Gold fell $33 to $1125; oil down $2 to 80.55, copper down $9 to $333.75
  • US trade deficit widened to $36.3 bln in November; wider than expected
  • Canadian trade deficit $0.34 bln in November
  • Federal Reserve posts 2009 net income of $52.1 bln
  • EU may sue Greece over economic statistics
  • Greek FinMin: No skeletons in Greece’s closet
  • US sells $40 bln 3-year notes at 1.49%, Bid to cover 2.98
  • US yields slip 13 bp to 3.71% in 10-year maturity, 2 year note ends at 0.91%

It was a choppy session for EUR/USD with prices opening on the weak side around 1.4460/65 in New York after China unexpectedly raised reserve requirements late in the London session. That move undermined the reflation trade and sent traders looking to square short-dollar positions against the euro and the commodity currencies.

EUR/USD rebounded ahead of options expiries at 1.4500 and follow-through buying was seen ahead of the 16:00 GMT fixing. Heavy offers at the 1.4560/90 level dissuaded dealers from pushing the EUR higher and we soon slipped back from where it all began.

Risk aversion was the theme of afternoon trade as gold fell sharply and US equities experienced their biggest dip of the new year of just over 1%.

AUD/USD slipped as low as 0.9170 support as traders gunned for stops below that level. Failing to trigger them, they scrambled for cover and price settled into a range around 0.9200 for the balance of the afternoon.

USD/JPY was a victim of long liquidation as uptrend support gave way early in the session. Prices fell as low as 90.75 before rebounding. Solid bids are seen in the 90.60/75 area but very large stops are clustered below the 90.00 level. We end near 91.00.

GBP/USD traded firmly during the US afternoon as the outcast USD, JPY and GBP all hovered together for shelter while the formerly invincible AUD and CAD weakened on the day. Cable closed just 20-pips below session highs of 1.6195 where central banks out of Asia were reported sellers.