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    Asian Session – Oil and dollar in retreat again; euro and pound firmer

    Asian equities were mixed on Tuesday as yesterday’s slump in oil prices weighed on risk sentiment. Shares in Tokyo ended the day lower as the effects of last Friday’s policy boost by the Bank of Japan wore off but China’s main indices closed over 2% higher, reversing Monday’s losses.

    The US dollar started the day flat after sliding yesterday on weak data. The ISM manufacturing survey showed activity contracting for a third straight month while personal consumption was unchanged in December from a month earlier. The greenback slipped below the 121 level against the yen to decline to 120.62 yen in late Asian session.

    Disappointing manufacturing PMI out of China also weighed on markets yesterday, dragging oil prices lower. US crude futures dropped below $33 yesterday and were trading around $31 a barrel in today’s Asian session.

    The Australian dollar fell back below 0.71 against the US dollar despite a less dovish than expected statement from the Reserve Bank of Australia. The RBA decided to keep rates steady at 2% at its meeting today and maintained its outlook for the Australian economy. But the Bank kept the door open for future cuts should inflation stay low for too long.

    The aussie was down at 0.7077 in late Asian session. Its New Zealand counterpart was also weaker today, trading at 0.6516 versus the greenback.

    ECB President Mario Draghi repeated his comments that the central bank will “review and possibly reconsider” its policy at the March meeting. Speaking in the European Parliament, Draghi said the downside risks to the Eurozone economy from the uncertainty in emerging market economies have increased.

    The euro was little moved by the comments as investors remain cautious about the size of any further policy easing by the ECB. The single currency advanced against the dollar in yesterday’s US session and was trading at just above 1.09 dollars today.

    Meanwhile, the pound was given a lift from better-than-expected manufacturing PMI yesterday. Sterling was off earlier highs of above 1.44 dollars in today’s Asian trading to stand at 1.4396 dollars in late session.

    Looking ahead to the rest of the day, construction PMI data is due for the UK along with the latest Eurozone unemployment and producer price figures.

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