Dollar Moves Little in Quiet Trading Session
Illiquid trading conditions brought on by the Thanksgiving holiday afforded the currency market a brief breather from the large price swings and volatile conditions of recent weeks, as the dollar strayed little from Wednesday’s levels against most of its major counterparts.
Late yesterday, the dollar was at 108.57 yen from 108.50 yen late Wednesday in New York. The euro was at $1.4855 from $1.4865 late Wednesday. The euro was at 161.27 yen from 161.28 yen.
Elsewhere, the dollar slipped a bit against the Swiss franc, to 1.1011 francs from 1.1019 francs, while the pound was trading at $2.0634 from $2.0663.
With U.S. markets closed and the data calendar light in Europe, yesterday’s currency trading was mostly limited and featureless.
The euro briefly touched a record overnight at $1.4873 but receded on a general lack of interest. Otherwise, yesterday’s session was marked by a mild and likely fleeting re-establishment of risk appetites that sent the yen slightly lower and was of some slight benefit to higher-yielding currencies.
“With no real markets out there today, there probably was a bit of a preference early on for the high-yielders,” said Shaun Osborne, chief currency strategist at TD Securities in Toronto, noting the modestly firmer initial tone for currencies like the Australian and New Zealand dollars.
Nevertheless, the session’s calm tone likely “doesn’t change the sense of gloom that has enveloped financial markets,” said currency strategists at Scotia Capital in Toronto, and market skittishness could easily and rapidly revive if equity markets falter again today or if oil prices make another assault on the $100-a-barrel mark.
The dollar is seen as remaining broadly undermined by fears of more bad news from the U.S. subprime-mortgage crisis and its impact on the financial sector, as well as by related factors like lower Treasury yields.
On Tuesday, the benchmark two-year Treasury yield dropped below 3% for the first time since December 2004, and the general decline in U.S. yields is expected to weigh on the dollar, given the distinct yield advantage now offered by euro-denominated investments and the narrowed yield spread between U.S. and Japanese bonds.