The dollar was underpinned in Asia following a bout of EUR long liquidation during Thursday's N.Y. session, which took it below support at 1.3140-50. Dollar shorts that were built up ahead of the U.S. fiscal cliff deal were pared back as speculative accounts booked profit. There are still doubts over the U.S. outlook as the deal has not addressed the debt ceiling, which will featured in the next round of negotations on spending cuts. Activity in Asia was still lower than usual due to market holidays in Japan and China. However, there were still more encouraging developments from China after non-manufacturing PMI came in at 56.1 versus 55.6 in November. Asian central banks were actively buying the dollar on dips in order to stop local currencies from strengthening, which could encourage reserve rebalancing in European trade

[EUR, USD]
EUR-USD ran into selling pressure on strength after it started the Asian session under 1.3200 following yesterday's sharp correction from 1.3300 towards 1.3150. There was heavy speculation of EUR-cross selling by macro funds and leverage accounts, which was reportedly a major influence on AUD and JPY yesterday. EUR-USD flushed out sell stops under 1.3140 and 1.3130 after good hedge fund interest went through from 1.3190 to reach 1.3125 before any buying of note went through. Expectations of Asian central bank flows kept the downside in check ahead of chart support from 1.3100.

[USD, JPY]
USD-JPY edged out fresh trend highs of 87.36 on dollar strength, along with ongoing appetite to sell the yen on strength. Price action was choppy after it posted an early high. Option barriers at 87.50 encouraged selling pressure, along with EUR-JPY after it fell back to 114.50 amid fund sales. However, both macro funds and short term range players were noted on the bid from 87.00-10.

[GBP, USD]
GBP held steady against the EUR, but weakened against the USD as speculative positioning was pared back during Wednesday's N.Y. session. The move was pinned on position adjustment following the recent risk rally. Cable threatened the 1.6200 region, but good bids put a floor in place and there are more orders into 1.6170. Asian central bank reserve management flows are also expected to rise now that the dollar has posted a modest correction from recent lows.

[USD, CHF]
USD-CHF traded as high as 0.9212 on dollar corrective action in the wake of the U.S. fiscal cliff deal. There are still lingering doubts in the FX space due to the unaddressed debt ceiling, which will feature in another round of negotiations over the next couple of months. The USD-CHF rebound out of levels under 0.9100 once again raised doubts over the lack of sustained downside pressure despite the bearish chart pattern and it is now trading at neutral levels. In the meantime, the risk backdrop will influence short term movement. Sellers are tipped into 0.9225, while support comes in now from 0.9150.

[USD, CAD]
USD-CAD was steady close to 0.9850 after it met sellers from 0.9870 into late morning, which is where interest was noted during yesterday's North American afternoon. The marked rally in global stocks yesterday and further gains in Asia should provide CAD$ with support on dips, leaving prices skewed to 0.9840-50. USD-CAD is nearing December lows of 0.9825, where very good support is noted ahead of 0.9800.