US Dollar Rally Unwound, Asia Quiet

Traders who rushed to buy US dollar a day were having second thoughts on Thursday as the buck tumbled. NZD, CHF and AUD led the broad rebound versus the USD. The Asia-Pacific calendar is quiet as traders there wind down the week. More on rising bond yields and the technical relationship with stocks and USD is found in last nights Premium Intermarket Insights below.

Bonds remain in charge as Treasury yields recouped some lost ground even as US stocks hit fresh highs. A round of the Feds operation twist kickstarted a bond rally that weighed on USD. The euro moved sideways for most of the European session before popping above 1.3090 to 1.3120 in a swift move that was later unwound.

Economic data continues to paint a picture of stable growth in the US. The Philly Fed improved to 12.5 compared to 12.0 expected, the Empire Fed to 20.2 vs 17.5 expected and initial jobless claims were at 351K compared to the 357K consensus.

The oil market was sent into turmoil after a Reuters report saying the UK and US were working on a joint plan to release strategic oil reserves simultaneously. The White House quickly denied the report and it appears as though some confusion about whether they are planning to actually release the reserves, or whether theyre planning to co-ordinate if/when they release the reserves.

In any case, oil tumbled $3 before recovering half the losses and the Canadian dollar was dragged down by the news.

The lone event of interest in Asian trading will be comments from US Treasury Sec Geithner scheduled for 2300 GMT. Final revisions to Japans January leading index at 0500 GMT are unlike to garner a passing interest.

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