• Fed’s Bullard: U.S. housing prices are stabilising. Housing starts likely to stabilise, to cease to be drag on GDP. Labour market improving, close to time when unemployment rate will start falling. Inflation risk for U.S. is not next year, more a 2-5 year horizon
  • Japanese Finance Minister Kan: Wants yen to weaken more. Must work with BOJ to bring yen to appropriate levels. Many firms in favour of USD/JPY around 95
  • Japan consortium to stop work on Dubai metro – Nikkei
  • Shanghai share index ends down 1.95 on worries over policy tightening
  • Swiss December CPI -0.2% m/m, +0.3% y/y, weaker than median forecasts of +0.1%, +0.5% respectively
  • France’s Sarkozy: World monetary disorder has become unacceptable. World needs to have multi-currency system
  • Euro zone November retail sales -1.2% m/m, -4.0% y/y, much weaker than median forecasts of +0.1%, -1.95 respectively
  • Euro zone economic sentiment up at 91.3 from 88.8 in November, better than median forecast of 90.0
  • China’s Commerce Minister: Yuan must definitely retain value. Yuan’s depreciation or appreciation would not benefit world economy. Beijing supports dollar retaining its value
  • German November new manufacturing orders +0.2% m/m
  • EU inspection team asked Greece to quantify measures in fiscal plan – Govt source
  • Dubai World: Spokesman says company is “some time away from presenting a restructuring plan”
  • Bank of England keeps bank rate at 0.5%, QE at £200 bln, as expected

Well well, what a morning and a half that was. At the end of it the JPY is weaker across the board, the USD stronger. So much going on. In short JPY hurt by comments from new finance minister Kan (see above). USD aided by Dubai, Greece worries and comments from Fed’s Bullard and the Chinese Commerce Minister (all can be noted above) Sure I’ve missed something, but that’s enough to be getting on with.

EUR/USD sits at 1.4330 having started around 1.4400 and having been as low as 1.4319. BIS has been very active in various currency pairings today and started off by selling EUR/USD up around 1.4400. The pairing was undermined early by reports that a consortium of contractors were to down tools on the Dubai metro because of non-payments from the Dubai government (who have subsequently come out to try and soothe worries). Comments from Fed’s Bullard also helped the dollar.

The sell-off extended to 1.4350/60 where it stalled out as Asian sovereigns bought. Eventually though a combination of USD supportive comments from the Chinese Commerce Minister, weak euro zone retail sales combined to nudge the pairing further southwards. Various comments from Greece, where the EU expedition is probing into the fiscal cuts, further weighed.

USD/JPY is up at 93.20 from an early 92.20. The move has been one way after comments from the new Japanese foreign minister Kan hit the wires (see above). The BIS and China stepped in selling around 92.95 which stalled the rally for a little while, but stops above 93.00 were eventually tripped on the way to session high 93.27. More stops seen on move through 93.30.

Cable is down at 1.5912 from an early 1.6000. The Reserve Bank of India has bought in the very low 1.59’s helping lend tenuous support. The pairing did attempt to rally but ran into BIS selling around 1.5950 and that was that.