US Dollar Pares Its Gains

Posted February 11, 2011

UK pound turns around. Euro is under pressure.


US Dollar

During the Thursday currency trading session, the US dollar pared many of its gains in the afternoon portion of the session. This is off the highest it had earlier in the day, which were up as high as one percent against the euro. The US dollar's earlier gains were due to the Portuguese bond yields that rose to the highest level they have been at since the start of the euro. This caused many investors to worry about the euro, with the debt concerns of the euro zone being the main focus yet again.

The US dollar index rose from 77.661 as of late in the day on Wednesday to 78.221 at the end of the day on Thursday in North American trading. 


During the trading day, the euro moved from US $1.3721 in late day trading in North America on Wednesday to US $1.3603 by the end of the session on Thursday. During the day, the euro fell to as low as US $1.3575.

The fall of the euro's value during the early portion of the trading day was mainly due to the 10 year government bond sale that pressed higher 7.6 percent at its highest point, which is up from the 7.27 percent it was at previously. The move lead many investors to speculate that the European Central Bank was buying Portuguese debt again. This comes after a period in which the relative calm of the markets helped to keep the ECB out of the market. Traders did not say there was specific reasons behind the pressure on the bonds, but many believe it was due to the lack of progression towards solving the country's debt problems, and the debt problems in the entire euro zone. 


Also notable during the Thursday trading session was the movement of the Japanese yen. Investors were watching the movements of the 30 year bonds that the US government was selling. This auction was effective, even though it did not get spectacular demand but did get enough. This led to yields rising slightly late in the day which made the securities a better option for investors overseas. The US dollar moved from Y 82.42 at the end of the Wednesday currency trading session to Y 83.35 by the end of the Thursday trading session. The rising of the US dollar against the yen was due to the rebound in the bond yields.