The dollar traded on an easier footing as risk appetite encouraged light speculative selling. EUR broke 1.3400 after stops gave way in early trade and extended to 1.3435. ECB's Asmussen added support to the move and said there were signs of a eurozone recovery in Q1 and policy remains accommodative. JPY firmed up despite stock gains, with position reduction influencing from early on. Uncertainty over the next BoJ Governor has restrained speculative interest via JPY. AUD-USD held up after the Australia December Leading Index maintained firm levels. The biggest move on the session came from NZD after RBNZ Governor Wheeler said NZD is overvalued and it stood ready to intervene if necessary.

[EUR, USD]
EUR-USD started the session just shy of 1.3400 and edged up through offers to force stop loss interest. Comments from ECB's Asmussen added traction and follow through demand carried it to the 1.3435 region. EUR-JPY demand also went through, though it retraced all of its gains and turned away from 125.90 to Asian opening levels at 124.90 on yen strength. EUR-GBP performed well and rallied out of 0.8670 to 0.8700 on macro fund demand, which was reinforced by yesterday's GBP weakness. EUR demand was also noted against the commodity bloc currencies. EUR-USD bias will remain higher, though offers from 1.3440-50 and 1.3475-80 are likely to restrain momentum. Buyers are seen at 1.3400 in the short term and into 1.3380.

[USD, JPY]
USD-JPY was unable to break 94.00 despite early importer demand. It rallied out of 93.50 and extended just over 93.80 after Japanese trade data saw a wider than expected deficit, though the break down was quite encouraging, with exports and imports both improving month-on-month. Solid offers ahead of 94.00 encouraged position traders to take profit and position reduction accelerated amid uncertainty over the BoJ Governor role. The Japanese press said Muto is now off the list and may be due to the known conflict between Abe and Aso over the issue. Japanese policy makers have said that a decision will not be made until after PM Abe's visit to the U.S. on Feb 21-24. The USD-JPY pullback extended under 93.20 and European traders are likely to focus on large stops below 93.00.

[GBP, USD]
Cable touched new trend lows of 1.5415 on Tuesday, as U.K. downgrade talk kept the pound weighed down. Tentative bids returned in front of the 1.5400 option barrier level, and thinned trade allowed GBP-USD to rebound back to 1.5450 in Asia. Movement from there was limited though due to fresh offers from this level and more interest parked at 1.5480 to 1.5500. A move decisively over 1.5600 will be needed to start flushing out some shorts.

[USD, CHF]
EUR-CHF ran into good sell-interest over 1.2350 after it posted a modest rally on Tuesday. SNB's Jordan gave EUR-CHF a boost from 1.2340 to the 1.2355-60 region after he said the Bank will enforce the EUR-CHF floor (1.2000) with the "utmost determination", adding the SNB's FX policy is focused on ensuring prices stability. He said the Bank's current policies are accepted by the IMF, and by global central banks. Good EUR-CHF offers are noted from 1.2370 and ahead of 1.2400, where buy stops are noted. A USD-CHF move back under 0.9200 has weighed a bit in early Europe, but overall it should remain steady in front of 1.2300-10.

[USD, CAD]
USD-CAD added to Monday's gains, rallying over 1.0135, levels last seen in late July. The 1.0050 level held up last week in the face of what was thought to have been selling related to the Nexen/CNOOC deal. There has been some talk a good portion of the deal will be funded through existing Canadian investments however, which has perhaps resulted in some decent short covering. The rally had little in the way of resistance on Monday, when both Canada and the U.S. were absent from the market, and higher levels prompted more buying this morning.