Thursday June 11, 2009 - 10:59:30 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar eases on U.S. debt concerns
* Dollar index down 0.4 percent at 79.904 .DXY
* Talk of BRICs diversification weigh on dollar
* High yielders and commodity-linked currencies gain
* Investors await 30-yr Treasury bonds, U.S. retail sales
(Adds quote, updates prices)
By Tamawa Desai
LONDON, June 11 (Reuters) - The dollar edged down against a
basket of currencies on Thursday as rising U.S. bond yields
raised concerns about burgeoning U.S. debt, and on speculation
big emerging countries may move out of U.S. dollar assets.
Russia said on Wednesday it would divert some of its
reserves from U.S. Treasuries to IMF bonds, a move that may be
highlighted when the world's largest emerging countries meet
Higher-yielding and commodity-linked currencies also gained
against the U.S. currency on the back of views the global
recession may be bottoming, as stock and oil prices gained.
"The concern over the scale of supply coming to the U.S.
debt market has been exacerbated by the moves of some major
central banks to diversify out of U.S. fixed income investments
and into IMF bond denominated in SDRs," said Derek Halpenny,
European head of global currency research in London.
But market players were hesitant to take big positions
before gauging the reaction to a 30-year U.S. Treasury bonds
auction scheduled later in the day.
U.S. Treasury prices fell on Wednesday, sending benchmark
yields up to 4.0 percent for the first time in eight months,
after an auction of 10-year notes.
Overall demand and a key proxy for foreign interest were
both robust, but a high yield at the auction was above market
Rising U.S. bond yields have so far boosted the dollar on
the basis that it reflected improving U.S. economic conditions.
Rising yields have also boosted appetite for U.S. paper from
so-called "real money" accounts hungry for yield as interest
rates in most major economies stand at record low levels as
central banks try to stimulate their ailing economies.
However, the market remains cautious if bond yields start
rising sharply on concerns about the U.S. fiscal situation given
its ballooning debt.
"Rising U.S. Treasury yields have not acted as a negative
yet, but we are very cautious," said Hans Redeker, global head
of FX strategy at BNP Paribas in London.
The dollar index, a gauge of the greenback's performance
against six other major currencies, fell 0.4 percent to 79.904
.DXY from late U.S. trade on Wednesday.
The euro rose 0.4 percent to $1.4031 <EUR=>, resuming its
rise towards a more than five-month high of $1.4339 touched last
week before falling sharply near $1.38 earlier this week.
The euro was down 0.1 percent at 137.12 yen <EURJPY=R>.
The dollar slipped 0.4 percent to 97.75 yen <JPY=>.
Markets were stirred after Russia's central bank said it
would cut U.S. Treasury purchases and buy IMF-backed bonds.
China has also said it would purchase IMF-backed bonds.
Brazil, Russia, India and China are set to meet in Moscow on
June 16, and markets expect further talk about diversification
of reserves away from the U.S. dollar.
The New Zealand dollar rose after the Reserve Bank of New
Zealand (RBNZ) kept its key interest rate steady at a record low
2.5 percent, the first pause in nearly a year, but left the door
open to resume easing to combat recession.
The kiwi climbed as high as $0.6442 <NZD=D4> after the
decision, up 2.2 percent on the day. The currency rose around
one percent to 62.93 yen <NZDJPY=R>.
Traders are keeping an eye on U.S. retail sales, which are
expected to show a 0.5 percent rise in May after falling 0.4
percent the previous month.
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