Dollar slides in New York

The dollar hit a seven-week low against the yen and dropped versus the euro on Wednesday, as US government bond yields tumbled following a solid debt auction, diminishing the appeal of the greenback. Rising global stock prices on expectations of stronger economic growth in 2011 also lifted investors' appetite for higher-yielding currencies and pressured the safe-haven US dollar, analysts said.
US Treasuries extended price gains, pushing yields sharply lower, after a $29 billion auction of seven-year notes drew surprisingly strong demand a day after a weak five-year sale. Lower bond yields make the dollar less attractive as it erodes the return on US assets.
"The reaction in the bond markets is fairly sharp," said Vassili Serebriakov, currency strategist at Wells Fargo in New York. "There's a broader move towards a weaker US currency." Thin trading ahead of the New Year's holiday likely exaggerated currency moves, traders said.
The dollar fell as low as 81.61 yen on trading platform EBS, the lowest since November 10. It was last down 1 percent at 81.64 yen. Support is seen around 81.50 yen. Citigroup technical analysts said the downward momentum in dollar/yen may continue after the recent double top close to 84.50 and the recent dead cross constructed by the five- and 21-day moving averages.
The Australian dollar rose as high as $1.0184, a 28-year peak. Rising commodity prices boosted the Aussie and helped investors shrug off fear that a recent Chinese interest rate hike would slow the economy. London Metal Exchange copper hit a record high. The euro hit a session peak at $1.3240 on EBS before pulling back to last trade at $1.3219, up 0.8 percent.
Worries that the eurozone debt crisis could spread to Spain and Portugal have many analysts bracing for more euro weakness in early 2011, but the currency's stubborn refusal to break below the 200-day moving average, now at $1.3086, has frustrated bearish investors. While the euro may see a rebound toward $1.35 in the near term, any sustainable gains look unlikely, analysts said. The euro was last at 1.2511 Swiss francs, more than half a cent from a record low, while the dollar fell to 0.9466 francs, near Tuesday's 0.9435 record low.