By: Hillel Fuld
The USD became stable on Wednesday after a sharp increase in U.S. Treasury yields assisted its recovery from a sharp decline vs the euro in a yo yo session the previous day marked by thin year-end flows.
The franc held near an all time high versus the EUR and greenback as investors sought refuge from euro zone debt, while the USD threatened to break below a familiar range against the Japanese curency, another currency that tends to gain from risk-aversion.
"The market is not driven by factors, but the thin conditions mean there could be more volatile moves," said a trader at a Japanese bank.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was slightly easier on the day at 80.29 .DXY =USD, though it still remained above Tuesday's low of 79.596.
"A lot of positioning has been flushed out after last night, so I don't expect much action today. There's nothing around in the order books at the moment," said a trader at a U.S. investment bank in Sydney.
The comeback came as U.S. Treasury yields increased across the board, with the benchmark 10-year issue gaining a hefty 16 basis points to reach just shy of 3.50 percent as dealers sought a bigger concession to take Wednesday's sales of seven-year government debt.
The higher yields helped make the dollar more attractive for buyers chasing better returns, though some analysts cautioned that the rise in bond yields, triggered after a weak five-year bond auction, may not bode well for the US currency.