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By XE Market Analysis February 11, 2021 2:36 pm
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    XE Market Analysis: Asia - Feb 11, 2021

    The Dollar perked up from early lows, which came on the back of a disappointing jobless claims outcome, later rallying modestly, though sticking inside narrow trading ranges overall. The DXY was held inside of Wednesday's trading band, bottoming at 90.28 before bouncing to 90.47. A record low yield in 2-year Treasuries just ahead of the data resulted in a broad but modest USD sell-off, though a modest round of short covering helped the Greenback through the morning session. Wall Street opened higher, though with valuations in question, sold off some in afternoon trade. Treasury yields started out lower, though bounced following a poorly subscribed 30-year auction. Friday's calendar is light, with just the preliminary February University of Michigan consumer sentiment index due.

    [EUR, USD]
    EUR-USD eased back from two-week highs of 1.2150 seen early in the session, later bottoming at 1.2122. The Dollar overall has moved away from early lows, and could be headed for a short term consolidation phase following the unwinding of early February gains this week. The DXY is back near levels seen at the start of the month, currently near 90.45, after topping at 91.60 last Friday. Barring setbacks on the Covid front, the USD should hold its own for now versus the Euro, as growth prospects in the U.S. outstrip those of the EU.

    [USD, JPY]
    USD-JPY has been range bound in N.Y. trade, opening at lows of 104.65, then peaking at 104.79. The pairing bottomed at 104.55 overnight, though is a long way off Friday's four-month top of 105.77. The Dollar has steadied some overall after a week of losses, which came following overbought conditions seen at the end of last week. Cooler U.S. inflation, and subsequent drop in Treasury yields have been a weight on the USD this week, though as Covid vaccinations ramp up, and the U.S. economy gets ready to run again, further USD weakness is liable to be limited going forward.

    [GBP, USD]
    Cable topped at 1.3859 overnight, opening the N.Y. session near 1.3845 before slipping to 1.3800 after the London close. Despite the inevitable rise in friction that Brexit has brought to trading relationship between the UK and EU, the Pound has performed admirably overall. Bullish Sterling considerations have included the UK's ahead-of-the-pack Covid vaccination program, which should enable the government to make a start on derestricting the economy before some peers, particularly the EU, and the BoE's recent signalling that has laid to rest any lingering expectations that the negative interest rate option would likely be implemented in the UK. The domestic data calendar picks up Friday, with the release of of Q4 and December GDP data, along with December production and trade figures.

    [USD, CHF]
    The SNB maintained policy settings in December and reaffirmed once again that it will use direct intervention on currency markets to keep a lid on the "highly valued" currency, despite the fact that the U.S. now official labels Switzerland as currency manipulator. There was no real surprise in the statement, with the central bank highlighting that Covid-19 is "continuing to have a strong adverse effect on the economy". The bank expects consumer prices to fall sharply this year and to stay around zero over the next two years, also thanks to a strong CHF. To start the year, EUR-CHF pulled back under the 1.0800 level, which had provided good support for much of December. The cross dipped to near two-week lows of 1.0787 in N.Y. on Wednesday, as risk taking levels pulled back, though managed to reclaim the 1.08 handle in N.Y. on Thursday.

    [USD, CAD]
    USD-CAD printed three-week lows of 1.2661 in early North American trade, down from overnight highs of 1.2711. The pairing later headed back over 1.2705, as oil prices came off their highs, and as the USD overall recovered slightly from early lows. Canada oil production has returned to pre-pandemic levels, after falling sharply in H2 of 2020, while prices for the Western Canadian Select grade of crude have rebounded from near $38.00/bbl at the end of January to over $47.00/bbl on Wednesday, all supportive of the CAD going forward.

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