The dollar continued to press higher as risk aversion steepened following the FOMC minutes, where there were louder calls for a halt in QE before the end of 2013 due to concerns over financial stability and the size of the Fed's balance sheet. This reinforced EUR liquidation and it extended to the 1.3010 area. JPY continued to meeting heavy selling pressure on strength as Japanese markets reopened for the first time this year, which drove USD-JPY to new trend highs over 87.80. It was a thin session for economic data. HSBC China services PMI fell to 51.7 from 52.1, which reflected a moderation in activity amongst small private firms and was third consecutive drop. HSBC said the underlying strength of services sectors improved in terms of stronger new business flows and employment growth. Australia's service sector index contracted for the 11th month at 43.2 from 47.1 previously. Meanwhile, Egan Jones said further U.S. rating downgrades are unlikely.

[EUR, USD]
EUR-USD met heavy selling from 1.3060 in early Asia-Pacific trade, which forced a move into 1.3020. There were good two-way flows on the way down, which reflected Asian commercial interest and decent order flows ahead of the psychological 1.3000 level. EUR-JPY's move off 113.80 to 114.40 also negated some of the heavy EUR long liquidation, which also helped EUR-AUD to stabilise around 1.2450. There are some short term accounts that may see a move into 1.3000 and below as an area to cover shorts, but the daily chart will reinforce EUR selling pressure on upticks, as long as risk aversion dominates action.

[USD, JPY]
USD-JPY rallied out of 87.00 after fund names put a floor in place from 86.75-80 yesterday. Japanese names were heavy buyers on the way up, which gained traction from the more hawkish sounding Fed minutes. A successful run on 87.50 option barriers triggered buy stops and it extended over 87.90 by early Europe. USD-JPY longs are still looking overcooked on the daily chart and speculative positioning remains severely overstretched, but yen bears are unwilling to give up Japanese policy bets. On that front, Japan FinMin Aso said yesterday that "excessive yen strength is being corrected" but it remains important that the yen doesn't swing rapidly and it is his government's "utmost priority to fight deflation and will cooperate with the BoJ to achieve this goal." Since the election, USD-JPY broke out of its range around 82.00.

[GBP, USD]
Cable broke down overnight as dollar buying picked up rapidly after the FOMC minutes, while U.S. rating fears also resonate following the recent U.S. fiscal cliff deal. It broke 1.6100 in N.Y. and extended to 1.6060 in Asia, leaving it just a short distance from near-term support at 1.6050. A move through this level would clear away another batch of sell stops and generate momentum on the psychological 1.6000 region. We think that recent shorts are likely to use this area to cover, while Asian reserve management activity is also expected to pick up at current levels. Sellers are now tipped from 1.6100 and increase in size from the 1.6140 area. Today's focus for the U.K. is services sector PMI, which will offer insight into the growth outlook.

[USD, CHF]
USD-CHF extended gains to trade within a few pips of 0.9300 as dollar buying steepened after the FOMC minutes. Dip buying is prevalent at current levels, with short term interest placed at 0.9260-70 and 0.9240. However, Asian reserve management flows may slow a move over 0.9300, where light stops are noted. Offers have also built up from 0.9330 to 0.9350.

[USD, CAD]
USD-CAD closed in on 0.9900 as risk aversion picked up further overnight after the Fed, while concerns over the U.S. outlook picked up amid a reassessment of the fiscal cliff deal. Good offers were into 0.9900 from fund names. Buyers remain close to market due to equity market weakness, with near-term interest at 0.9870-80, while corporate bids remain a feature on the downside from 0.9850.