US Auction Well Received

The dollar to euro rate rose on Wednesday after the US government sold $19 billion in 10 year notes. Investors were reassured about the US’s ability to sell long term debt to ease mounting deficits. The dollar to yen rate was also affected by the auction. The US Treasury sold the 10 year notes which have a high yield of 3.99%. The sale was part of a combined auction of $65 billion of US debt. Investors saw the auction as a test of the US government’s long term borrowing ability.

Auction ‘Dollar Positive’

The results of the auction were dollar positive. Michael Woolfolk of Bank of New York Mellon stated, “There were concerns about appetite for Treasuries. The results of this auction have put to rest those concerns for the time being and any peripheral fears about the dollar as a safe store of value have also been put aside. This is positive for the dollar overall.”

Euro’s Rise Triggers Automatic Sell Off Orders

The Euro’s rise above $1.40 triggered automatic sell off orders and put downward pressure on the euro. The euro to dollar rate fell to $1.3952 a decline of 0.7%. Investor concerns about long term economic recovery pared gains made by high yielding stocks and currencies. The dollar to yen rate rose 0.9% to 98.27 and the dollar to pound rate fell from a high of $1.6473 to $1.6276.

US Treasury to Sell $2 Trillion in Debt This Year

The US Treasury plans to sell $2 trillion in debt this year triggering investor concerns and affecting currency exchange rates. The announcement that Russia planned to reduce its purchases of US Treasuries put pressure on the dollar Tuesday. Despite concerns about rising US deficits recent auctions of US debt have been well received. Firas Askari of BMO Capital Markets stated, “The U.S. Treasury market is still the deepest and most liquid available.”

Although many traders hold a pessimistic view of the future of the dollar, recent gains are good news for the US. Many experts expect currency exchange rates to follow the lead of equities markets.