U.S. fiscal cliff uncertainty remained, along with expectations of aggressive Japanese policy stimulus. The dollar was supported on dips, while the yen plunged to new trend lows. The market tried to remain optimistic on the U.S. fiscal cliff amid reports that Obama will host a meeting with Reid, McConnell, Boehner and Pelosi in a bid to reach a compromise before the debt ceiling deadline. A heavy Japanese data calendar offered justification for more policy easing after industrial production and manufacturing weakness, while deflationary headwinds also remained. Elsewhere, South Korea industrial output came in stronger than expected and the current account surplus also widened. In China, the week long meeting on economic planning ended with promises of short and long-term measures to ensure stable growth. In Europe, the final reading of French Q3 GDP is expected to be confirmed at 0.2% q/q. France also has November consumer spending data.

[EUR, USD]
EUR-USD steadied ahead of 1.3200 on Thursday, leaving it on a supportive footing around 1.3230-40 in the Asian time zone. It looks likely that the dollar will find a modicum of support on dips unless there is significant U.S. fiscal cliff progress. Some specs got caught long EUR around the 1.3270-80 area yesterday and this has deterred larger gains during today's Asian session. Those accounts trading the range have placed offers from 1.3270, while buyers are noted from 1.3200 to 1.3180.

[USD, JPY]
USD-JPY and EUR-JPY experienced heavy buying interest by Japanese accounts hedging ahead of year-end and next week's Tokyo holiday. USD-JPY moved up through more option barrier levels at 86.50 and EUR-JPY soared from 114.00 to 14.65. There has been no let up in yen selling despite very overstretched speculative positioning. USD-JPY longs are targeting a move into Y90.00, which was mentioned as a reasonable level by several policymakers and lobby groups over the last week.

[GBP, USD]
Cable marks time under 1.6125 after it corrected during Thursday's N.Y. session from just over 1.6200 late on in the European morning to lows around 1.6065. It elicited support on dips, but fiscal cliff uncertainty and month end support for EUR-GBP is leaving the near-term bias on a move below 1.6100.

[USD, CHF]
USD-CHF moved back over 0.9150 as fiscal cliff nerves picked up. However, it struggled to sustain higher levels due to a weak technical backdrop and low market participation via this pair ahead of year-end. It drifted back towards 0.9120 and risk is still skewed to levels under 0.9100.

[USD, CAD]
USD-CAD maintained a firmer tone overnight after it moved off 0.9910 back to 0.9960 during Thursday's session as risk appetite deteriorated on U.S. fiscal cliff doubts. In the absence of domestic data focus came from the U.S. ahead of the weekend. The daily chart set up suggests more range trading. Asian market gains encouraged tentative selling, but for the most part short term accounts appear unwilling to add risky positions ahead of the year-end and the downside looks limited ahead of 0.9900. Over 0.9950 there are still several resistance levels between 0.9955 and 1.0000, which will keep ranges tight.