Forexpros – The U.S. dollar was broadly higher against its major counterparts in thin year-end trade on Wednesday, with the euro tumbling to an 11-month low after a successful Italian bond auction failed to ease concerns over the debt crisis in the euro zone ahead of a ten-year debt sale on Thursday.
Trading volumes remained light following the Christmas break, as many traders have closed books before the end of the year, reducing liquidity in the market and increasing volatility.
During U.S. morning trade, the greenback was up against the euro, with EUR/USD dropping 0.94% to trade at 1.2948, the lowest since January 11.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.
Despite the upbeat results, Thursday’s sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
Adding to concerns, data released earlier showed that the use of the European Central Bank’s overnight deposit facility reached a new, all-time high of EUR452.03 billion on Tuesday.
The figure topped the previous record of EUR411.8 billion set on Tuesday. Heavy use of the deposit facility is seen as a sign of stress in the banking system, reflecting reluctance by banks to lend to each other.
The greenback was also sharply higher against the pound, with GBP/USD tumbling 1.2% to hit 1.5482.
Meanwhile, the dollar was higher against the yen and the Swiss franc, with USD/JPY easing up 0.04% to hit 77.92 and USD/CHF climbing 0.77% to hit 0.9413.
Japan’s government said earlier that it will not change its stance on taking appropriate action in the foreign exchange market as needed. The comments came after the U.S. criticized the country for intervening in order to stem the yen’s appreciation against the greenback.
Elsewhere, the greenback was up against its risk-sensitive Canadian, Australian and New Zealand counterparts. USD/CAD advanced 0.26% to hit 1.0215, AUD/USD slumped 0.44% to trade at 1.0112 and NZD/USD fell 0.29% to hit 0.7708.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.8% to trade at 80.78.
No major U.S. economic data was due for release Wednesday, while reports set for release during Thursday’s trading session include the latest estimate of weekly jobless claims, a December purchasing-managers index for the Chicago region and November home sales.
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