Dollar Mildly Lower As Sentiments Lifted By Optimism On Fiscal Cliff

Asian equities are mostly higher on the positive tone struck by US president Obama after meeting with Congress leaders last Friday over the issue of fiscal cliff. Obama affirmed again when he started his Asia trip and said that he's confident to get the "fiscal situation dealt with."

Most major currencies are higher against dollar as the week starts on positive sentiments and Aussie is so far the comparatively stronger one. Meanwhile, the Japanese yen edged lower to seven month low against dollar as BoJ meeting starts. Markets are generally expecting more easing from the BoJ after December's election. But for now, BoJ will stand pat this week first.

The euro is holding comfortably above last week's low of 1.2661 against dollar so far and is expected to recover further as consolidation goes. EU finance minister will meet in Brussels tomorrow regarding Greece. The financing for Greece for 2013 and 2014 are expected to be settled during the meeting, with approval of the next tranche of bailout funds. However, European Central Bank board member said Greece won't likely have market access in 2015 and 2016 and a follow-up program would be necessary.

Also, the two year extension to fiscal adjustment program opened up a financing gap of over EUR 30b and the details about filing the gap would be discussed in the meeting. IMF chief Lagarde will also attend the meeting as she's opposed to delaying the target of lowering Greece's debt to 120% GDP by two years to 2022.

In China, there have been heightened speculations on internationalization of RMB. According to Zhou Xiaochuan, governor of the PBOC, "the next movement related to the yuan is going to be reform of convertibility." Zhou also stated that the central bank is moving in that direction and will have some deregulation.

At present, the currency is allowed to fluctuate with a 1% from the central parity rate each trading day. Last week, Guo Shuqing, Chairman of the securities regulator announced that China would expand the Renminbi Qualified Foreign Institutional Investor Program (QFII) quota by RMB 200B from RMB 70B.

Latest CFCT data showed euro net shorts jumped again and reached 83.6k contracts on November 13, comparing to 67.1k a week ago. That's also the largest number Since September. Yen net shorts dropped slightly from 40.1k to 30.4k but that was before prime minister Noda dissolved lower house. We would likely see yen shorts go up again in next set of data.

Sterling net longs dropped sharply to 8.2k, comparing to prior week's 19.3k and 2012 high of 30.1k made in early October. Canadian dollar net long continued to fall to 66.1k, comparing to2012 high of 111.9k made in September. Australia dollar net longs continued to climb back to 68.1k, comparing to 38.4k low in October and 89.6k high in September.

Data released today so far saw New Zealand PPI input unexpectedly dropped -1.0% qoq in Q3 while output PPI dropped -0.9% qoq. UK right move house price dropped -2.6% mom in November. US existing home sales and NAHB housing market index are featured later in the US session.