What can't go up forever apparently won't, and today has seen a couple violent moves. The dollar, which has risen by more than 10% against the yen since the BOJ surprised with a 5-4 vote to accelerate its already aggressive monetary easing on October 31, rose to new multi-year highs yesterday just shy of JPY122 sold off to reach almost JPY119.50 today.  

There was not a fundamental trigger, though the sell-off in global equity markets may have encouraged the some profit-taking.  Much of the pressure, however, appeared to stem from crosses, especially the dollar-bloc. A poor business confidence survey saw the Australian dollar fell to $0.8225, and fueling more calls for rate cuts next year.

Chinese stocks also staged a dramatic reversal. The Shanghai Composite, which extended its recent moon-shot initially by taking on another 3% to bring the gains since the last November surprise rate cut to nearly 27%, reversed sharply to close 5.4% lower on the day.  It was led by a 7.5% drop in financials, and almost as large a drop in the energy sector.  Regulators have been warning about investors getting ahead of themselves in recent day. Earlier today, regulators tighten collateral rules for equity margin. No longer can AA rated bonds or lower be used for collateral to buy stocks. This effectively drained liquidity, though the PBOC itself refrained from open market operations. 

The yuan itself sold off sharply.  It has declined by 1% since the end of last week. The dollar reached CNY6.2080 today, the highest level since July. The recent low was set at the end of October near CNY6.1080. China reports inflation and lending figures tomorrow. Barring a significant surprise, many participants will continue to look for a near-term cut in the reserve requirements. 

Ideas that the UK economy was enjoying new momentum late in the year were stopped cold by the disappointing industrial production and manufacturing data. October industrial production and manufacturing were expected to have both risen by 0.2%. Recall the October manufacturing PMI rose to 53.3 in October from 51.6 in September. Today the UK reported industrial output fell by 0.1% while manufacturing output slumped 0.7%. The implied yield of the December 2015 short-sterling contract is nearly 10 bp higher than yesterday. UK gilts are outperforming.