NEW YORK (CNN/Money) - The dollar rallied Wednesday as traders took profits in other currencies, while long-term Treasury prices made big gains after a government debt auction drew strong demand.
The euro bought $1.3327, down from $1.3429 late Tuesday. The dollar bought ¥104.14, up from ¥102.88 late Tuesday.
"[It was] all position-squaring, nothing fundamental. Everyone was worried about a correction and here it is," Jason Daw, senior G10 foreign exchange strategist with Merrill Lynch in New York, told Rueters.
The rapid decline of the dollar in the past few months had traders anticipating a broad rebound. But how far the move goes to retrace the currency's losses may depend on how thin trading conditions become as the year closes.
"I wouldn't be surprised if this correction went another day," said Daw. He added that some investors who profited off the dollar's descent may want to hold onto their winnings instead of trying to play the currency's move higher.
Dealers said decisions by the central banks of Australia and Canada to not raise interest rates were largely expected, but they served to remind the market that, while interest rates are rising in the United States, they are likely to remain flat in other countries, where growth has been constrained, at least in part because of strong currencies.
Rising interest rates tend to attract foreign investment, which pushes up the value of the local currency as local currency is often needed to make those investments.
In Treasuries, long-term government debt surged in a burst of foreign buying that soothed concerns about a possible decline in foreign demand for U.S. government debt.
The benchmark 10-year note added 26/32 of a point to 100-31/32 to yield 4.13 percent, down from 4.23 late Tuesday. The 30-year bond jumped 1-18/32 points to 108-24/32 to yield 4.78 percent, down from 4.90 late Tuesday. Bond prices and yields move in opposite directions.
The two-year note edged up 2/32 of a point to 99-30/32 to yield 2.90 percent, while the five-year note gained 12/32 of a point to 100 flat to yield 3.50 percent.
Indirect bidders, which include offshore central banks, picked up a huge 65 percent of the total $15 billion sale, well above November's 44 percent and the highest share since the breakdown was first published in mid-2003.
"There was massive indirect bidding and the market's flying," Gregg Cohen, a trader at CIBC World Markets, told Reuters
|
