FOREX-Dollar steadies; commodity prices lift Aussie

* Dollar recovers from selloff as U.S. yields spike

* Moves exaggerated by very thin year-end conditions

* Swiss franc near record high; commodity currencies gain

(Updates prices, changes byline, dateline; previous TOKYO)

By Jessica Mortimer

LONDON, Dec 29 (BestGrowthStock) – The dollar stabilised on
Wednesday as a spike in U.S. Treasury yields helped it recover
from losses the previous day, while gains in commodity prices
lifted currencies such as the Australian dollar.

The dollar’s gains were tempered, however, as weak U.S.
consumer confidence and home price data on Tuesday pointed to a
fragile economic recovery. [ID:nN28251373]

The dollar index (Read more about the global trade. ), which tracks the greenback’s performance
against a basket of currencies, was slightly easier on the day
at 80.278 (.DXY: ), though it held above Tuesday’s low of 79.596.

The Swiss franc held near a record high against the euro and
the dollar as investors sought refuge from the debt problems
that have dogged the euro recently. The dollar also threatened
to break below a familiar range against the yen, another
currency that tends to gain from aversion to risk.

The market remained very thin, however, and susceptible to
exaggerated moves after a yo-yo session the previous day which
was marked by year-end flows and saw the dollar fall sharply
against a range of currencies.

The turnaround came as U.S. Treasury yields rose across the
board, with the benchmark 10-year issue gaining a hefty 16 basis
points to reach just shy of 3.50 percent after a poor auction of
five-year bonds. [US/]

“Higher U.S. yields are supporting the dollar, though the
very thin market is making big moves possible,” said Niels
Christensen, currency strategist at Nordea in Copenhagen.

The euro was up 0.1 percent at $1.3128 (EUR=: ) after a
whipsaw move on Tuesday that took it to $1.3275, its strongest
since Dec. 17. It held above support at its 200-day moving
average, now at $1.3084, and last week’s low just above $1.3050.

Higher yields make the dollar more attractive for investors
chasing better returns, though analysts cautioned that poor bond
auctions also highlight the fiscal problems facing the United
States. Investors will watch for a sale of seven-year debt on

“If U.S. yields are rising because of worries over U.S.
fiscal conditions, or rising inflation expectations, that’s
probably negative for the dollar,” said Tohru Sasaki, chief FX
strategist at JPMorgan Chase Bank in Tokyo.


The euro fetched 1.2495 Swiss francs (EURCHF=: ), barely above
a record low of 1.2440 francs set a week ago.

The franc also held not far from a record high against the
dollar. The U.S. currency traded at $0.9523 (CHF=: ) after hitting
an all-time low around $0.9437 on Tuesday.

“The Swiss franc is well supported by fundamentals, risk
aversion and by people diversifying out of euros,” said Nordea’s

The yen was also supported by risk aversion after hitting a
six-week high against the dollar and a near two-year high
against sterling pound on Tuesday.

The dollar slipped 0.3 percent to 82.17 yen (JPY=: ), off
Tuesday’s low of 81.81 yen. In what technical analysts see as a
major bearish sign, it dropped below the bottom of the daily
Ichimoku chart at 82.39.

Commodity-linked currencies staged solid gains as commodity
prices rose, with London Metal Exchange copper hitting a record
high on Wednesday. [MET/L]

The Australian dollar (AUD=D4: ) rose 0.3 percent to $1.0128,
not far off a 28-year peak of $1.0182 set in November. It rose
as high as $1.0153 on Tuesday, shrugging off China’s decision to
raise interest rates on Saturday. [ID:nTOE6BO010]

Traders also cited talk of sovereigns switching out of euros
into other currencies, including the Australian dollar.

The dollar slipped 0.3 percent versus the Canadian dollar to
C$0.9981 (CAD=D4: ), not far from C$0.9931 hit in April, a break
of which could push it to a level not seen for 2-1/2 years.

(Additional reporting by Hideyuki Sano in Tokyo)

FOREX-Dollar steadies; commodity prices lift Aussie