The dollar and yen consolidated losses. The risk backdrop was supported by a rally across global equity markets as U.S. markets were optimistic that U.S. politicians would reach a deal on the fiscal cliff, but there were mixed news flow in Asia. EUR benefited on news late Monday that the eurogroup will agree on another aid tranche for Greece. However, the EUR upside was capped after Moody's downgraded France from AAA to AA1 bringing it in line with the S&P rating. Meanwhile, the BoJ left policy unchanged as expected and left the economic outlook unchanged. The RBA minutes left the door open for more easing ahead, but said the current policy stance was appropriate. Elsewhere, China FDI fell 0.2% y/y in October and down 3.5% y/y on the year-to-date, which marked the 11th time out of 12 that investment has dropped. Eurozone finance ministers will meet today to decide on the payout of the next bailout tranche of EUR 31.5 bln but also how to cover Greece's additional financing needs and reports suggests that officials are ready to give a tentative go ahead.

[EUR, USD]
EUR-USD started the Asian session above 1.2800 after yesterday's news that the eurozone agreed on aid for Greece. However, after opening around 1.2815 it fell back to 1.2765 after Moody's downgraded France a notch to AA1 from AAA. The move was in line with S&P's rating, which dampened the market reaction. Buyers were persistent on dips and included specs and sovereigns, which briefly lifited it back to 1.2800. The better risk backdrop was supportive for the EUR, but there were no big bets being put on ahead of today's eurogroup meeting. The short term picture is looking a bit better for the EUR and buy stops over 1.2825 are likely to be targeted in the near-term, though sellers are also congested all the way up to 1.2880 and movement is more likely to remain choppy. .

[USD, JPY]
USD-JPY was choppy on mixed news flows, but it maintained its bid tone overall. EUR-JPY dipped from 104.30 to 103.80 after Moody's downgraded France, but ran into dip buyers, which reflected general EUR-USD demand and the broad equity market rally. USD-JPY remained capped ahead of yesterday's 81.60 highs and threatened support ahead of 81.00 after the BoJ left policy unchanged as-expected. However, the bullish technical backdrop and expectations of a LDP election victory continued to provide support and it remains on course to test option barriers from 81.75 to 82.00.

[GBP, USD]
Cable continues to trade close to 1.5900, but it has met selling pressure from positional traders layering offers to 1.5950 since Monday, which should keep the topside in check, along with last week's dovish commentary from the BoE. Movement on the downside could be limited by the better risk backdrop, which has worked against the dollar tone, while there are option defensive buyers under 1.5850.

[USD, CHF]
CHF is relatively stable. USD-CHF supply is noted on upticks due to the better global market risk backdrop, which forced it back to 0.9400, while EUR-CHF marks time just under 1.2050 after it recovered from the 1.2035 level late last week. SNB has reiterated its desire to maintain current policy after the last two sessions and this is likely to provide a default bid to USD-CHF on dips as SNB recycle reserves out of the EUR and back in the USD. We anticipate buyers towards 0.9400 and below, which was the case in N.Y. dealings on Monday.

[USD, CAD]
USD-CAD steadied after selling picked up speed on Monday after it moved through 1.0000 and cleared away sell stops through 0.9970-80. The pairing touched lows near 0.9955, where position traders and corporate bids put a floor in place. However, the much improved risk backdrop, along with the recent rollover to the USD-CAD downside should encourage selling pressure on upticks now. Offers will be reset over 1.0000 and layered from 1.0020-30 and across 1.0050.