FOREX ASIA UPDATE - USD

After the early Tuesday retreat following the stronger than expected Japan GDP, the USD stabilised in the North American session despite generally weaker domestic data releases. At the weaker end of the recent USD ranges, the market seems to need more encouragement such as a clearer shift in the Fed's stance to hurt the dollar further.

Overnight, both growth and inflation data - from the downward revisions to earlier month retail sales numbers and a tame PPI - were weak. Ex-auto retail sales fell 0.4% after a 1.2% drop in September (revised from -0.5%) and 0.0% in August (revised from +0.2%). There was also the record-tying 1.6%m/m plunge in the overall finished goods PPI in October while the core PPI excluding cars and trucks rose only 0.1%, unchanged from the previous three months. But US yields didn't sustain their initial reactive move lower and the USD also rebounded after initially selling off.

Yesterday's comments from Poole seemed to acknowledge more concern about the housing market, but he also said the policy outlook is symmetrical. With Fed officials consistently maintaining a symmetrical policy risk message in their public comments so far, markets have been cautious about pricing in much risk of easing through Q1 of next year.

Today, we expect a weaker NY Fed's Empire State manufacturing survey after the exaggerated rise in October. The minutes to the October 24-25 FOMC meeting will be released at 1900GMT. We expect the minutes to show officials comfortable with staying on hold for now, but also significant uncertainty on what happens next.