Short-covering and profit-taking saw the USD give back some of its gains from Monday. Early price action in Tokyo saw a fresh wave of JPY cross selling around the Tokyo fix, with Japanese derivatives desks sales linked to structured products. CAD, GBP-USD, GBP-JPY and EUR-JPY extended Monday’s recent decline on the flows. However, AUD-USD, NZD-USD, EUR-USD and USD-JPY were unable to revisit the lows made in NY, prompting a wave of profit-taking that ignored significant declines in Asian stock markets and the usual risk averse sales of JPY crosses. The Nikkei was down over 3% during morning trading. There is talk that a quasi-official Japanese institution has been selling JPY crosses for the last week, culminating in today’s morning sales, and with the program completed, JPY crosses were able to bounce. EUR-USD bounced back to 1.2949 after finding solid support at 1.2897. USD-JPY bounced back to 98.45 from lows of 97.73. NYMEX crude remained under $46 after the strong sell-off Monday while gold was little changed after the strong rally. Treasury yields edged lower in reaction to the Asian stock market losses.