Posted December 09, 2010
US dollar continues climb. Treasury yields improve during day.
The US dollar was up for third day against most of its major rivals on Wednesday. Investors saw the day as more favorable and the improvements of the US dollar were minimal as many moved back towards the euro in the hopes of improving risk conditions. A tentative US deal on taxes helped to add fuel to this as Treasury bond yields increased. Treasury yields increased over the last two days. The jump in these bonds has been the most since September of 2008. It has helped to push prices down which has some investors concerned.
The US dollar index improved against most of its major competitors moving from 79.973 at the end of the Tuesday trading session to US 79.985 by the end of trading in North America on Wednesday. Investors believe that the higher yield rates should cause the US dollar to strengthen in areas that are yield sensitive, such as the relationship between the US dollar and the Japanese yen.
However, the fact that US President Barack Obama has defended a tax deal created with the opposition party has many investors worried about the outcome on the US economy.
The euro improved on the day somewhat, but did not hold on to those gains long term. The US dollar moved from US $1.3259 as of the close of business on Tuesday in North American trading to US $1.3268 by the end of the trading on Wednesday.
There continues to be growing concern about the euro zone’s financial health. The Irish government’s ability to put in place an effective austerity budget is also concerning to investors. While that budget did clear one major stepping stone it still has two additional to go. Because many investors believe that the Irish budget will occur, this helped to encourage investors to move away from the perceived safety of the US dollar.
During the Wednesday currency trading session, the UK pound moved up 0.3 percent against the US dollar. It moved to US $1.5809 by the end of the trading session on Wednesday.
During the currency trading session, the US dollar rose against the yen. The yen is particularly sensitive to the fluctuations in US yields. The US dollar moved from Y 83.51 as of the end of trading in North America to Y 84.05 by the end of trading on Wednesday.