The allure of the US dollar was revived overnight as equity markets fell under the weight of concerns the fourth quarter reporting season in the US would not measure up to expectations. Risk aversion became the common theme with the greenback moderately higher against major counterparts.  Sterling bucked the trend on the back of better than expected Trade balance data. The UK Trade deficit narrowed to GBP 6.8 billion in the month of November against a previous downward revision of GBP 7 Billion to represent the smallest deficit since August 2009. This kept Sterling well bid against the greenback rising to highs of 1.6196 and remains well support at current levels of 1.6165.

Commodity currencies tumbled overnight as China unexpectedly increased the amount of deposit reserves required by banks, in an effort to reduce the risk of inflation and the likelihood of an asset bubble developing. The central bank announced requirements will increase by 50 basis points from the existing level of 15.5 per cent starting on January 18. This saw the Aussie take a hit overnight falling to lows of 91.7 US cents, following on from yesterdays less than convincing housing data.  The latest Aussie dollar winning streak came to a halt yesterday as Home Loan approvals for the month of November fell a seasonally adjusted 5.6 per cent, against expectations of a fall of 2.3 per cent. At the time of writing the local unit is buying 92.1 US cents - in the absence of economic data, we expect movements to be governed by movements in local equity markets.