JPY was the main mover. An early bout of profit taking forced USD-JPY into 86.80, but thereafter it traded on the front foot on good demand from Japanese names and offshore accounts as markets price in Japanese policy changes later this month. According to reports on Tuesday, Japan will release a supplentary budget, which will include Y5.2 tln in public works spending. A Reuters report also said that BoJ will ease policy further and also adopt a 2% inflation target. Other movement in Asia was more limited, with EUR-USD treading a very narrow range under 1.3100. AUD saw more activity and turned away from early highs of 1.0524 to 1.0487 lows after weaker than expected retail sales and a deep drop in quarterly job vacancies. NZD maintained firmer levels, but struggled to clear offers ahead of 0.8400 after a sharp fall in new dwelling consents.

[EUR, USD]
EUR-USD maintained relatively narrow ranges under 1.3100. An early downside test on EUR-JPY supply met buyers just under 1.3070 and it headed back over 1.3090 in lockstep with the recovery in EUR-JPY. Ahead of Thursday's ECB policy meeting it's likely that interest remain on the lower side. Support is noted into 1.3000 and below, while a build of offers are seen just over 1.3100 and larger in size from the 1.3140-50 region.

[USD, JPY]
USD-JPY traded out of early lows around 86.80 just over 87.50 on good demand from Japanese importers and fund names bargain hunting under 87.00. JPY was well overdue for a clear out and the USD-JPY move under 87.00 may increase the risk of a more sustained run higher. A BoJ policy move is now fully priced in, though long-term expectations of ongoing Japanese policy stimulus still has long term accounts positioning for an eventual move on 90.00. EUR-JPY also overcame an early move on 113.55 and rebounded to 114.50 and AUD-JPY recovered from 91.20 to 91.90 as Japanese retail accounts shrugged Australian data weakness.

[GBP, USD]
Cable range players are still more inclined to sell into strength following last week's drop to 1.6010 and poor U.K. fundamentals, which continues to fuel speculation of a U.K. rating downgrade. However, at current levels there is a lack of interest. Into 1.6000 and below there are reports of corporate hedging and reserve management flows, while sellers are short term in nature until the 1.6200-50 area, where more macro fund types are noted.

[USD, CHF]
USD-CHF steadied after it held on to the 0.9200 following a brief period of dollar weakness during Tuesday's Asian session. USD-CHF's move lower came in lockstep on the EUR-USD squeeze up through 1.3100 and extended run on 1.3140. However, broader market sentiment weakened and the dollar firmed up, which lifted USD-CHF back to the 0.9250, where it has been in N.Y. and today's Asian trade. We expect short term accounts to play the range. However, a break below recent lows at 0.9185 would reinforce dollar bears.

[USD, CAD]
USD-CAD held above 0.9850 through the overnight session, a level which has provided good support virtually since the start of the year. Solid bids had been reported on a daily basis under the level, and buyers returned after a brief move to 0.9844 at the start of yesterday's North American session. The pair traded back to the 0.9880-85 area and then drifted back to 0.9865-70 and it looks as if more range trading will continue.