Dollar gloom: Greenback set for its biggest losses versus the Euro since 2003

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December 28, 2017 5:07 PM

The currency also faced a setback as the recent strong demand for dollar funding over year-end eased. The dollar was on track for an almost 12 percent decline this year versus the euro, its worst performance since 2003. Volatility in foreign-exchange markets was exacerbated amid thin trading volumes.

The dollar reached its lowest level in a month versus the euro on Thursday as an earlier slide in Treasury yields and year-end rebalancing flows weighed on the currency that’s heading for its worst year in more than a decade. (Reuters)

The dollar reached its lowest level in a month versus the euro on Thursday as an earlier slide in Treasury yields and year-end rebalancing flows weighed on the currency that’s heading for its worst year in more than a decade. The greenback declined against all its Group-of-10 peers after benchmark U.S. Treasury yields fell by the most since September on Wednesday. The currency also faced a setback as the recent strong demand for dollar funding over year-end eased. The dollar was on track for an almost 12 percent decline this year versus the euro, its worst performance since 2003. Volatility in foreign-exchange markets was exacerbated amid thin trading volumes. “Month-end flows in illiquid market conditions are the primary driver” of the dollar’s weakness, says Jason Wong, a currency strategist at Bank of New Zealand. “Risks are skewed for dollar losses against the pound and euro in 2018.”

The euro climbed 0.4 percent to $1.1932 as of 9:39 a.m. in London, after touching $1.1947, its highest since Nov. 27. The Bloomberg Dollar Spot Index fell 0.3 percent, extending its decline this year to 8.2 percent, its biggest slide since data starting at the end of 2004. Ten-year Treasury yields rose two basis points to 2.43 percent on Thursday, after tumbling seven basis points the previous day, the steepest drop since Sept. 7. “Lower yields are generally not good for the dollar so that’s an important reason,” said Georgette Boele, a currency strategist at ABN Amro Bank NV, adding that “this time of the year currency markets are mainly technical driven and order driven.”

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