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Dollar Rebounds to Small Gain in Thin, Choppy Session

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Dollar Rebounds to Small Gain in Thin, Choppy Session

  • JPY pares monthly decline before BOJ policy decision
  • Turkish lira drops after Russian ambassador shot in Ankara

Hassium's Dewan: Dollar Strength Is Driving the Market

The dollar shrugged off modest losses and traded higher as measured by the Bloomberg dollar index late in the Monday session, tracking a rebound in 10-year Treasury yields from session lows and stemming a surge in the yen ahead of the Bank of Japan rate decision.

FX flows are very modest in the session and mostly confined to position-tweaking and last-minute hedging as traders and investors reduce trading activity ahead of the Christmas break and New Year holidays; liquidity is below average and price action has been choppy at times as order flows hit, making conclusions hard to draw, traders say.

Dollar-yen snapped back to trade above 117.20 after dropping to 116.55 intraday as JPY surged vs all G-10 peers.

Traders attributed the lift in the 10-year Treasury yield to upbeat remarks from Fed Chair Yellen to graduating students at the University of Baltimore; she said that living standards have risen on the back of economic gains and the graduates are entering the strongest job market in a decade.

  • USD/JPY snapped back to about 117.35 after dropping in morning trading, feeling weight from GBP/JPY, which dropped almost 2% before rebounding and EUR/JPY, which dropped as much as 1.2%.
  • JPY remains the strongest vs USD on the day within the G-10 peer group but is still nursing losses vs those peers when measured on a monthly basis
  • FX trading flows are driven more by risk avoidance rather than fresh position-taking, traders in London and Toronto said; interbank traders are inclined to keep risk profiles low while macro hedge funds and other longer-term players continue to hold modest core long USD positions, one trader in London said.
  • EUR/USD traded to a fresh session low at 1.0401 and may test technical support at 1.0367, the low from Dec. 15
  • USD/TRY rose as much as 0.9% to 3.5369 after the Russian ambassador was shot dead in Ankara