The U.S. dollar and yen are again on the back foot on Wednesday as the risk-aversion on Tuesday pulled back, allowing investors to return to riskier currencies.

The euro was one of the laggards throughout the Asia-Pacific session and much of the European session until stronger than expected demand at a Portuguese bond auction gave the currency a lift.

Portugal raised €661 million in 2013 bonds and €378 million in 2021 bonds, and although the yields were somewhat higher than at recent sales, the results were taken as good news as it quelled fears that the regional government was having difficulty finding investors to buy it debt, a factor which has weighed on the euro for the last several months.

Over in Japan, the yen has completely ignored calls from Ichiro Ozawa, challenger to Prime Minister Naoto Kan for leadership of the Democratic Party of Japan, for the government to sell more bonds as a means of weaken the yen.

Also ignored were additional comments from Finance Minister Yoshihiko Noda, once again promising “bold action” on FX to weaken the Japanese yen.

USD/JPY is nearly flat on the day, but the yen has pulled back against major currencies.

The pound sterling is making a solid comeback despite some inline industrial production and manufacturing data in the region.

Industrial production advanced an annual 1.9% in July, just short of calls for a 2.0% pickup, while manufacturing production was up 4.9% spot on with expectations.

After selling off very sharply in the last several days, GBP/USD is benefitting from a much needed technical rebound.

The Australian dollar is the day’s top performer, boosted by the clearer political picture in the region, following Tuesday’s election results.
 

As traders set their sights on the North American session, focus will likely lie on the Bank of Canada’s interest rate decision, as well as the Federal Reserve’s Beige Book Economic Report later in the day.