The dollar was largely in rally mode in N.Y. trade on Monday, as some risk came off the table following last week's gains. EUR-USD eased back under 1.3515 late in the session, after faltering overnight, and after opening in N.Y. near 1.3670. Politics in Europe were an issue, as Spanish PM Rajoy is embroiled in corruption allegations, while in Italy Berlusconi has caught up in the latest polls, which is a negative for structural reform and policy continuity. It was risk-off on Wall Street as major indices gave back most of Friday's sharp gains, while on the economic front, the calendar was light, with just December factory data on tap. The orders result was softer than forecast, though had little lasting impact on markets. Tuesday's U.S. calendar is light as well, with just January non-manufacturing ISM on hand.

[EUR, USD]
EUR-USD theatened 1.3550 on U.S. name selling from 1.3375 after the N.Y. open. The interest was reportedly on behalf of short term fund names that are reducing EUR long positions after eurozone peripheral spreads widened on political uncertainty in the region. The EUR downturn was notable after Friday's latest CFTC position data showed a build up in speculative EUR long positions, while the daily chart also corrected overbought levels. There were EUR buyers under 1.3350 and around the 1.3320-30 region, which slowed afternoon losses, but given the political backdrop, offers are likely to be lowered to 1.3600.

[USD, JPY]
USD-JPY pulled back to 92.55, where it was trading at the London open, which compared with trend highs of 93.18 recorded during the European morning. A EUR-JPY correction was the leading influence on the dollar pairing after the cross retraced an early push up to 126.70 and reversed on eurozone political uncertainty. Short term positioning exacerbated the sell-off, which extended to 125.50. Buyers at the lows included hedge funds, as well as Tokyo backed bids. However, it is struggling to reclaim 126.00 as short term accounts attempt to keep the pair offered under 126.00. USD-JPY is still in fairly good shape due to a wall of Japanese bids from, which is keeping the underlying trend firmly intact. USD-JPY idled at 92.50-70 through the morning, before heading to 92.30 lows into the close. Japan is expected to defend its right to continue to aggressive policy stimulus at the G20 judging by comments last last week and today from Finance Minister Aso. However, as we approach the meeting on February 15-16 FX related comments could pick up from other global leaders. Japan policy makers have said Y95 or Y100 is no problem for Japan.

[GBP, USD]
Cable was supported from 1.5700 at the European open by a macro fund, while a sovereign wealth fund out of the Middle East was also a sterling buyer. Cable moved into 1.5740, though momentum was limited after U.K. construction PMI came in at 48.7 in January, which was weaker than expected, but matched December's 48.7 outturn. Buyers returned in N.Y. however, as decent short covering was noted. Cable made its wat to highs over 1.5770 into the close.

[USD, CHF]
EUR-CHF topped out from the 1.2400 region and headed back towards 1.2350 on general EUR weakness. A pullback in European equity markets boosted the swissy tone, though layered bids from 1.2330 to 1.2300 eventually succumbed to pressure, sending the cross to lows of 1.2260 in N.Y. trade. USD-CHF corrected recent weakness and briefly moved over 0.9100 from the 0.9080 area, though fell back to 0.9075 as the cross weighed the dollar pairing down. On Friday, it threatened the key 0.9000 level, where long term support and very large option positions are noted. The dollar weakened on risk appetite, but USD-CHF in particular, was exacerbated by month end swissy demand. Many market sources anticipate this influence to drop off now and could allow EUR-CHF to strengthen further in the medium term. However, on an intra-day basis the risk backdrop is driving short term flows.

[USD, CAD]
USD-CAD moved up to 0.9980 after opening near 0.9950. Lower equities and oil prices weighed on the loonie, as risk came off the table after last week's surge. Aside from making a marginal one-week low overnight, the downside remains hampered by ongoing bidding interest. Corporate and option related buyers are noted from 0.9950 all the way down to 0.9900. On the other side of the market, fund and CTA types are seen on the offer from 0.9980. USD-CAD continued to grind slowly higher, as dealers reported decent buying interest, though standing offers have slowed the process. The pairing peaked at 0.9993, and stops are now getting into range, noted at 1.0010.