Wednesday, 10 Nov 2010

Forex: Shrinking U.S. Trade Deficit Assists USD

The euro lost ground against the dollar on Wednesday, dragged lower by losses versus sterling, which fell after a Bank of England inflation report made further monetary easing in the UK look less likely.

The dollar was largely higher today, rallying to a one-month high versus the yen, above the 82 price mark, and supported by higher U.S. bond yields. Traders also commented that an auction of Portuguese government bonds, at which borrowing costs rose compared with a previous auction, also weighed down the euro.

The dollar gained after longer-dated U.S. Treasury bond yields jumped yesterday, with the market watching for an auction of 30-year debt later today. The positive figure for U.S. unemployment claims and a shrinking trade deficit also added firmness to the greenback.