The dollar maintained an easier tone after a moderate rally across European equity markets boosted risk appetite. A 0.8% rebound in China's SSEC helped sentiment, though EUR and Cable also benefited on yesterday's positive performance. JPY was stable as excessive speculative positioning weighed on USD-JPY and it tripped stops under 82.00. EUR-CHF was a big mover for the second consecutive session after Credit Suisse announced that it will charge up to 1% on CHF deposits, which fueled unwinding of speculative positioning and it reached 1.2145 highs. In the U.S. a quiet calendar will leave the focus on U.S. fiscal cliff negotiations, while in Canada the BoC are expected to leave rates on hold at 1%.

[EUR, USD]
EUR-USD was underpinned throughout. Model fund and real money demand went through in early Europe to force a move out of 1.3050 to the 1.3080 area. Option related selling capped initially, but another round of demand from 1.3060 kept it underpinned after carving out an intra-day high of 1.3085. Firmer European stocks have kept the dollar on the backfoot, while there are reports of Asian central bank reserve diversification, which should leave risk on 1.3100 barriers. Highs from mid-October lie between 1.3130 and 1.3140 if risk appetite improves further in the U.S. today. However, a quiet U.S. calendar will leave the focus on U.S. fiscal cliff negotiations, which are likely to continue right to the year-end deadline.

[USD, JPY]
USD-JPY traded on the heavier side after it triggered stops through 82.00 in early Europe as excessive positioning and large option expiries weighed. Follow through selling should remain limited due to bids to 81.70, as well as BoJ policy risk, though the upside is looking more limited now after it failed to clear 83.00 last week. Good size strikes are rolling off at 82.50, 82.35 and 82.00. Large 81.00 and 80.00 maturities roll off and are linked to RKOs at 82.85 to 83.50, which could reduce some of the supply currently noted from 82.50. Option desks anticipate potential USD-JPY supply after the N.Y. options cut today, though downside momentum will remain limited while support between 81.65 and 81.45 holds.

[GBP, USD]
Cable continued to trade on the front foot despite the U.K. construction PMI miss. The November reading moved back into contractionally territory, but Cable was unmoved around session highs close to 1.6120. The pick up in European stocks has been the catalyst for dollar selling pressure on upticks, while Cable's break over 1.6100 on Monday reinforced upside risk. Progress from here may slow due to hedging activity around 1.6125-30 and oustanding option barriers at 1.6150. EUR-GBP flows have been supportive, with corporate selling picking up since the start of the week from 0.8120-30.

[USD, CHF]
EUR-CHF cleared 1.2100-20 for the first time in six weeks amid local name demand following yesterday's decision to charge negative rates on depos by one of Switzerland's largest banks. The swissy move today is speculative in nature in anticipation that capital inflows will drop off, though the improved tone in the eurozone has also added traction. Eurozone bond markets are in much better shape and this has helped to shore up the EUR downside over the last week. USD-CHF has also been stable despite last week's bearish break lower. After moving into 0.9250 it reached levels, where buyers saw good risk-reward. More support is tipped at 0.9230 and into 0.9200-10. Offers lie from 0.9300 ahead of short term buy stops.

[USD, CAD]
USD-CAD headed back over 0.9950 after risk appetite soured on poor U.S. ISM data and the U.S. fiscal cliff impasse. Overall, USD-CAD remains a range trade and we see little chance of a break of range ahead of the North American open as the focus is now on the BoC policy announcement. Bids are noted from 0.9900 and below and offers are tipped from the 0.9960 area. The BoC are expected to leave rates at 1% and maintain its language regarding eventual withdrawal of stimulus that was seen in September.