Dollar Retreats Mildly Even Though Markets Stay In Risk Averse Mode

Sentiments remain weak as the week is heading to close. Asian equities are broadly lower following the -121pts fall in the Dow overnight. Nikkei and HK HSI opened lower and stayed deep in red despite brief recovery on China data. Nikkei is down nearly 80 pts while HSI is down -140 pts at the time of writing.

In the currency markets, though, the dollar failed to extend gain on the risk aversion and retreated mildly against other major currencies. Note that EUR/USD is being support by a near-term fibonacci level, GBP/USD holds above 1.5912 near-term low, USD/CAD is facing near-term resistance at 1.0019. That is, technical level could turn dollar into consolidations for today.

Data from China saw CPI unexpectedly dropped to 1.7% yoy in October while PPI rose back to -2.8% yoy. Industrial production rose 0.6% yoy in October, beating expectation of 9.5% yoy. Fixed assets investments rose 20.7% yoy versus expectation of 20.6%. Retail sales rose 14.5% yoy in October versus expectation of 14.3% yoy.

Cooler inflation opens the dollar for additional easing from the Chinese authorities. Meanwhile, growth data also suggest that the economy could be gather some momentum for a stronger recovery. PBoC governor Zhou Xiachuan said yesterday that recent economic data showed improvement and people will be more confidence about Q4. He also noted that policy next year will remain targeted and flexible, with room for adjustments.

In US, bow that the election dust is settled, what President Barack Obama would do in his second term to avoid the US fiscal cliff problem is of the focus. He is scheduled to speak on Friday about the issue. According to a statement from the White House, the President "reiterated his commitment to finding bipartisan solutions to: reduce our deficit in a balanced way, cut taxes for middle-class families and small businesses and create jobs." House Speaker John Boehner Boehner called for cooperation and stated that he’s confident that the Republican would accept new government revenues as part of a deal to reduce the federal debt.

In Europe, it's reported that Eurozone finance ministers would not make a decision on releasing Greece's bailout fund next week. Instead, they'd wait for a final report from troika instead. A draft version of report would be available for Monday's EcoFin meeting, but that's believed to be insufficient for making the decisions. German Finance Minister Schaeuble noted yesterday that "I don’t see how we can take the decision already next week." Meanwhile, Greece parliament will convene against on Sunday on 2013 budget. And, it's believed that November 26 would be the possible date to finally sign off the release of the EUR 31.5b tranche of bailout fund to Greece.

SNB board member Zurbruegg said that the central bank is "aware that the huge amounts we have under management could impact significantly on market prices." And, "SNB takes care to ensure that its investments do not disrupt the markets."

He noted that SNB is "constantly assessing ways to improve the diversification of its investments: with active analysis and monitoring on new asset classes and difference currencies to "reduce risk concentration over time." Nonetheless, Euro is still SNB's "principal investment currency". Meanwhile, he's confidence that the policy on Swiss Franc is "effective, and we shall continue to pursue it with the utmost determination."