MW: Dollar's slide enters third day, with focus on U.S. debt sales
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- The dollar declined on Monday, falling for a third session against the euro, as traders have little to focus on besides the massive amounts of debt the U.S. government is taking on -- including $118 billion in fresh Treasury auctions on tap for this week.
"There is just too much debt," said Andrew Brenner, head of emerging markets at Guggenheim Securities.
The dollar index (DXY 77.59, -0.10, -0.13%) , a measure of the greenback against a trade-weighted basket of fellow major currencies, fell to 77.565 from 77.836 in late New York trading on Thursday. Markets were closed on Friday for Christmas, and will be closed this coming Friday for New Year's Day.
Last week, the index reached the highest since September
The euro rose to $1.4408, gaining from $1.4361 on Thursday. The shared currency hasn't closed above $1.44 since Dec. 15.
Meanwhile, the dollar was little changed against the Japanese currency, buying 91.56 yen, compared to 91.65 yen late Thursday.
Market analysts and investors outside of the bond realm have paid more attention to Treasury auctions this year -- largely for indications of whether foreign investors, who own almost half of all outstanding U.S. debt, continue to show an appetite for U.S. bonds, which will be key to keeping interest rates down for homebuyers, companies and a wide range of other borrowers.
So far, international buyers continue to participate in Treasury auctions, more so for some maturities than others, and analysts will be looking at results of Monday's sale of 2-year notes. See more on Treasury bonds.
The U.S. is expected to issue $2.6 trillion in fiscal 2010, which began in October, according to Morgan Stanley.
The federal deficit has also been in the news more as Congress inches closer to passing pricey health-care reform legislation, Brenner noted.
"People don't believe the health-care package is going to add zero to the deficit," he said.
Nonetheless, other analysts warn not to read too much into the dollar's movement, coming off a long weekend and in another holiday-shortened week.
"Expect thin and choppy trading conditions thought the New York session on Monday, as much of the rest of the world remains on holiday,' said analysts at Action Economics. Aside from the Treasury auction, "the calendar is empty, and as a result, U.S. dollar directional clues may be hard to find," they told clients.
No U.S. economic data were scheduled for Monday, though reports later in the week are expected to show an improvement in consumer confidence and fewer unemployment claims. See more on economic forecasts.
That may provide some support for the dollar, which, in recent weeks, has responded positively to improvements in economic data. That's a switch back to a more traditional relationship and away from the main driver for most of this year: risk appetite.
Since the credit crisis abated, signs of improvements in the economy caused investors to step away from the safe-haven attraction of the U.S. currency and toward higher-yielding assets, including stocks and emerging markets.
The dollar posted a small decline against major counterparts on Thursday after a pair of U.S. economic reports pointed to better conditions in the employment market as well as strong durable-goods orders. Read Thursday's Currencies column.
