The dollar steadied against the euro on Wednesday as a spike in US Treasury yields helped it recover from losses the previous day, while gains in commodity prices buoyed the likes of the Australian and Canadian dollars.
The market remained very thin, however, and susceptible to exaggerated moves after a yo-yo session the previous day which was marked by year-end flows and saw the dollar fall sharply against a range of currencies. The turnaround came as US Treasury yields rose across the board, with the benchmark 10-year issue gaining 16 basis points to just shy of 3.50 percent after a poor auction of five-year bonds.
The dollar index, which tracks the greenback's performance against a basket of currencies, was flat on the day at 80.319, holding above Tuesday's low of 79.596. The euro was steady on the day at $1.3118 after a whipsaw move on Tuesday that took it to $1.3275, its strongest since December 17. It held above support at its 200-day moving average, now at $1.3084, and last week's low just above $1.3050. Sovereign offers were reported above $1.3150.
The euro traded at 1.2475 Swiss francs, barely above a record low of 1.2440 francs set a week ago as investors sought refuge from debt problems that have dogged the euro. The franc also held not far from a record high against the dollar. The US currency traded slightly weaker at $0.9500 after hitting an all-time low around $0.9437 on Tuesday.
The yen, seen as another safe haven, was also supported by risk aversion after hitting a six-week high against the dollar and a near two-year high against sterling on Tuesday. The dollar slipped 0.3 percent to 82.18 yen, close to Tuesday's low of 81.81, with traders citing stop loss orders below 81.75. Technical analysts highlighted a bearish signal as the dollar traded below the bottom of its daily Ichimoku cloud, a closely watched Japanese technical indicator, at 82.39.
The Australian dollar rose 0.2 percent to $1.0118, not far off a 28-year peak of $1.0182 set in November. It rose as high as $1.0153 on Tuesday. The dollar slipped 0.3 percent versus the Canadian dollar to C$0.9982, not far from C$0.9931 hit in April, a break of which could push it to a level not seen for 2-1/2 years.