Yen eases ahead of BoJ

USD/JPY edged up in Asia, helped by the Nikkei which rallied. Bank of Japan is in focus and there are expectations of fresh policy initiatives tomorrow, including cutting the interest rate on excess reserves – which would be negative for the yen. USD/JPY moved up from 117.58 to 117.93. EUR/JPY also rallied from 136.45 to 137.12 in thin conditions. Expectations of ECB QE are high however.

EUR/USD opened in Asia at 1.1605 after getting a lift from short-covering in Europe. Up a bit to 1.1607 early, it eased back thereafter on broad USD strength led by USD/JPY. A low of 1.1572 was seen but consolidation looks to be in store ahead of the key ECB decision Thursday. QE is completely priced in though opinions differ as to the extent of the program (@E500 bln could disappoint) and how it would be managed (ECB vs national central banks).

GBP/USD fell back from 1.5111 to 1.5058 in tandem with EUR/USD on broad USD strength. EUR/GBP remained slightly better bid between 0.7680-92 on more short-covering.

USD/CHF consolidated between 0.8777-0.8805 in nervous trading. EUR/CHF similarly did little, holding nervously between 1.0176-1.0209.

AUD/USD opened in Asia at 0.8212 after moving sideways yesterday in a holiday-thinned trading. Up a tick to 0.8213 early, it fell back on broad USD strength and position squaring ahead of Chinese data. From a low of 0.8169 prior to the data, it rallied to 0.8214 on somewhat better than expected results but momentum waned and sent AUD/USD back through 0.8200 to 0.8160.

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