FOREX ASIA UPDATE - USD

The market has seen repeated rounds of sell-offs and rallies but with the USD index still trapped within a 3% range since June.
Yesterday's stronger than expected NY Fed and the lingering implicit bias towards tightening in the FOMC minutes saw USDJPY hitting the 118 mark again.
With the environment for carry trades still healthy, and markets not likely to price Fed easing too aggressively yet, we think dollar downside is likely to remain contained in the near term.

It seems likely that USDJPY sellers could return above this level again, especially if we get more hawkish statements from the BoJ policy meeting later today.

A busy US data calendar today - led by the core CPI, industrial production, HMI and the Philly Fed - could also dampen USD optimism. We expect another fairly tame rise in the core CPI, still low jobless claims, soft manufacturing data, only a modest rebound in the Philly Fed index, to 5.0 (consensus: 5.4) from -0.7, and some further weakening in housing demand as we look for the housing market index easing to 30 (consensus: 30) after 31.
Also today, Fed Governor Krozner speaks at 1410 GMT, St. Louis Fed Pres. Poole at 1445 GMT, and Chicago Fed Pres. Moskow at 1500 GMT.