Becalmed FX

US dollar is mixed, but the downside momentum seen recently seems to be taking a hiatus.  It is difficult for me to believe that it was comments by Bullard and Plosser turned the market as the former does not vote on the FOMC and Plosser's comments did not represent any new ground.  Both are known to be on the hawkish side of the Fed's spectrum.  Now Rosengren (non voter) and Evans have weighed in.  In my understanding, thsoe forces that favor a continuation of QEII are in the majority and will carry the day.   

That said there has been some backing up in some short-term US yields.   The Dec Eurodollar futures contract's implied yield is 10 bp higher than a week ago.   The US 2-year yield is up 14 bp and the spread discount to Germany has narrowed 9 bp.  It is dipping below 97 bp today for the first time in two weeks. 

The dollar is flirting with the JPY82.00 area, the upper end of its range since the bout of intervention earleir this month.  There market seems like yen, and not just at the IMM (most recent week through last Tuesday +4500 contracts net long to 34.5k contracts),   MOF data also revealed last week foreign investors had bout about $11 bln in Japanese equities to raise the year-to-date total to about $31 bln.  I lean against seeing much follow through on a break, though it is possible given market positioning, as I don't think there will be a panic.  Still there is a daily trend line coming in below JPY83 that may prove important. 

Provided the euro holds $1.4060, the euro can return above the $1.4120 area in the North Ameican session.