Dollar Higher on Risk Aversion, But Stays in Range

Asian markets are broadly lower following yesterday's ECB disappointment. In addition to that, sentiments are generally weighed down by dimmed hope of substantial progress from the EU summit. One of the focuses is that EU leaders seemed to have agreed that the bailout fund won't get a banking license. The implication is, the bailout fund won't be able to do direct capitalization of banks and won't have access to ECB funding. Dollar index is back pressing 79 level for the moment But after all, EUR/USD, GBP/USD, USD/JPY, USD/CHF are all kept in familiar range so far.

European Council President Van Rompuy said today that there will be a new intergovernmental treaty that includes the 17 eurozone states and six other European Union countries. So, that doesn't cover all 27 EU members and analysts said that a reflection of a deep split between France/German and UK. Though, the treaty is still seen as an important effort to ensure balanced state fiscal budgets and should reoccurrence of the sovereign debt crisis.

Meanwhile Van Rompuy also said some EU countries would provide up to EUR 200b to IMF to shore up troubled nations. It's believed that the fund would included EUR 150b from bilateral loans from ECB to IMF, with another EUR 50b from non eurozone EU countries. Half of the fund is expected to go into IMF fund reserved for lending to Eurozone. The remaining half would go to IMF's General Resources Account. It's expected that the additional contribution by EU countries would open the door from BRIC countries.

On the data front, Japan BSI large manufacturing index dropped -6.1% qoq in Q4. Q3 GDP was revised down to 1.4 qoq. China CPI moderated more than expected to 4.2% yoy in November while PPI dropped to 2.7% yoy. It's believed that the lower inflation reading should give China more leeway to loosen credit. Looking ahead, German CPI and trade balance, UK PPI and trade balance, US and Canadian trade balance will be released today.