Dollar Pares Drop After Weak 10-Year Treasury Auction

  • Greenback remains tethered to yields as jury out on direction
  • Dollar-yen tests low since November before rebounding

The dollar pared losses after a 10-year Treasury auction was poorly received, with traders still apprehensive about the Trump administration’s currency and trade policies.

The dollar was down against the yen and most of its G-10 peers, though the Bloomberg dollar index had clawed back to down just 0.1%. Dollar-yen tested the weekly low of 111.60, which was lowest since November, and appeared poised to fall past the level until it rebounded beyond 112.00 following the weak auction. The dollar earlier tested support at the 100-day moving average amid persistent anxiety about Trump’s views.

While the president hasn’t tweeted on FX recently, a report that he had spoken to one of his advisers on the topic just added to perceptions that the greenback is on the president’s mind, though his views remain undefined and thus uncertain, traders say.

At a time when economic fundamentals and divergent monetary policies favor the dollar, real-money players and traders remain reluctant to commit to large dollar positions for fear that a U.S. policy statement could derail such a position.

  • The dollar’s drop against the yen this week comes after Japanese investors dumped USTs in December in an effort to avoid losses and as Japanese yields start to look more attractive after a recent steepening of the curve
  • USD/JPY dropped to 111.63 before bids cushioned the drop, further bids are in place at 111.30/35, traders in London said
  • A breach of the weekly low of 111.60 may allow declines as far as 110.00 to the base of the cloud on Ichimoku charts that are favored by Japanese investors, traders say
  • EUR/USD fell back below 1.0700 after stalling at 1.0714 amid offers stacked to 1.0720, the euro’s drop also coinciding with the broader USD rebound
  • Further offers are positioned from 1.0735 to 1.0750, bids are in place under 1.0620, below the session low at 1.0641
  • Some information comes from foreign exchange traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly
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