Market Review – 29/12/2010 21:37 GMT
Dollar falls as strong Treasury demand hits bond yields
The dollar fell to a 7-week low against the Japanese yen after the auction of 7-year Treasury notes was met with strong demand. The solid debt auction provided support to the price of Treasury securities and sent the yields lower, diminishing the appeal of the greenback.
The $29 billion auction of 7-year notes was met with strong demand as indirect bidders, which typically include buying by foreign central banks, took 64.2% of the debt, the highest since June 2009.
The greenback remained under pressure against the Japanese yen throughout Wednesday. The pair fell from 82.45 and penetrated Tuesday’s low of 81.81 to as low as 81.61 in late NY trade before stabilizing.
The single currency extended Tuesday’s selloff from 1.3275 to 1.3083 at Asian opening before rebounding on short-covering and on talk of possible buying from Asian central banks. Euro ratcheted higher at NY opening after German preliminary Dec CPI M/M rose by 1.0% (forecast was +0.1%), being the highest monthly increase since Dec 2004 whilst Y/Y index rose by 1.9% (forecast was +1.6%) and was the highest since Oct 2008. Euro later rallied to 1.3240 in NY session on dollar’s broad-based weakness.
The British pound initially dipped to 1.5352 but cable managed to rebound from there. Price later rose sharply and rallied to 1.5518 in NY trade on dollar’s broad-based weakness.
Economic indicators to be released on Thursday include:
US jobs data, Chicago PMI and pending home sales.