Wednesday, 29 Dec 2010

Forecasts of Muted US Recovery Pulling Down on USD

The dollar weakened broadly in light trading today, after strong demand for safe-haven Treasury debt fanned concerns about the U.S. economic recovery.

The Treasury Department held its final note auction of the year, in which $29 billion worth of 7-year notes found a healthy number of buyers. The results were surprising to many market watchers, given that they occurred a day after a poorly received 5-year note auction.

But coming as it did on the heels of Tuesday's weaker-than-expected U.S. consumer confidence and housing data, the auction led some analysts to surmise that investors might be seeking shelter in safer assets. If that is the case, confidence in the U.S. recovery could be waning, and prompting traders to sell the dollar.