The US dollar is sporting a softer profile today as the global capital markets are trying to stabilize.  Oil prices have steadied, with WTI back above $30. Bond markets are narrowly mixed though the 10-year US Treasury is steady near 1.85%. Asian and European equities followed US markets lower, but American equities have stabilized, and ahead of the ADP employment estimate and the ISM for non-manufacturing, S&P 500 is set to open slightly higher.

The dollar continued to shed the Kuroda-inspired gains against the yen, falling to JPY119.25 in the European morning. We see near-term risk extending to the JPY118.50-JPY118.80 area. A set of options at JPY119.50 are set to expire today.Tomorrow sees larger options expiration, but with strikes of JPY120 ($3 bln) and JPY121.50 ($1.5 bln), they are not in play.  

The yen’s 0.5% gain today is not the largest.  That honor goes to the New Zealand dollar.It is up nearly 1.3%. The rally was spurred by the RBNZ Governor Wheeler. He dampened expectations for a rate cut, warning against a “mechanical response” to the drop in oil prices. The Kiwi was also boosted by a constructive Q4 employment report. The unemployment rate fell to 5.3% from 6.0%. The consensus anticipated an increase. The drop in the participation rate (68.4% from 68.7%) played a role, but employment rose 0.9% in Q4, recouping in full the 0.5% decline in Q3. 

The Australian dollar could not keep pace with the New Zealand dollar.Building approvals jumped twice what the market expected. The 9.2% gain in December follows a revised 12.4% decline in November. It is a volatile series,and the year-over-year rate remained negative.Separately, Australia reported a much larger than expected trade deficit. The A$43.53 bln shortfall is the largest since June. The Aussie fell to around $0.7000 after approaching $0.7130 yesterday. It has recovered.Initial support in North America may be found near $0.7040, and there is potential back toward $0.7080-$0.7100.