USD flows: US falls as gaps close but underlying story remains

The USD has reversed a lot of the overnight gains in the last hour, but without an obvious trigger and we would tend to see the move as primarily technical, with the currencies generally closing the opening gaps seen in Asia. Equities are also rallying and getting close to closing the gap, but we don’t see a good rational to reverse the overnight moves, so we expect the riskier currencies will move back down once the gaps have been closed, albeit probably not immediately. USD/JPY has edged up a little as equities have rallied, driven by cross buying, but yield spreads still suggest scope for a move down to 153 or below and a bigger move is likely if we see a larger equity market correction.