Dollar hits record low versus franc

The dollar set a record low against the Swiss franc and hit a 6-1/2-week low against the yen on Tuesday after Japan reported its factory output rose in November for the first time in six months. But a decline in US consumer confidence and lingering worries about Europe's debt crisis helped lift the greenback against the euro, which swung from a high of $1.3274 to a low of $1.3094. It was last at $1.3116, down 0.3 percent.
Touches 6-1/2-week low vs yen Higher US bond yields, driven up by a weak five-year Treasury note auction, also helped the dollar rebound against the euro and pare losses against the yen. The dollar fell 0.4 percent to 82.42 yen after earlier hitting 81.81 yen, its lowest since November, while the euro hit a 3-1/2-month low of 107.64 yen.
A 1 percent jump in Japanese factory output, the first rise in six months, "certainly has provided a bid to the yen across the board," said Dean Popplewell, chief strategist of FX brokerage OANDA in Toronto. Traders said the dollar's drift lower in recent days also reflected year-end repatriation by Japanese exporters. Similar year-end positioning also helped lift the Swiss franc, with Swiss corporate buying sending the dollar to a record low 0.9435 francs. It was last at 0.9520 francs, down 0.8 percent from late Monday.
The dollar also traded lower against commodity-linked currencies such as the Australian and New Zealand dollars, but some analysts said investors were still wary of taking on too much risk for fear Europe's debt crisis could worsen or the US economy could grow more slowly than expected in 2011. The market expects more euro weakness next year as worries persist about debt problems in Spain and Portugal, though euro bears have been frustrated by the currency's firm support for more than a week at its 200-day moving average below $1.31.
The euro's early rise stopped just shy of $1.3278, the 50 percent retracement of a monthly decline from $1.3500 to $1.3055 last week. That raised doubts about whether the euro would reach $1.3330-35, the 61.8 percent retracement of the December decline, before year-end.
"As much as investors want to deny it, there are still lingering concerns about the impact of Europe's debt crisis, about a sluggish US recovery and about Chinese rate hikes," said Kathy Lien, research director at GFT Forex in New York.
The dollar often attracts a safe-haven bid when investors grow averse to risk. On the other hand, the dollar has benefited from this month's rise in bond yields, which fed expectations that US growth will quicken and long-term interest rates rise in 2011.