Dollar Trades Mixed; Euro Can't Sustain Rise

NEW YORK ( BBH) -- The U.S. dollar was trading mixed vs. the majors even as broader market sentiment improves.

The euro tried to extend Tuesday's gains and temporarily traded north of $1.30 in the Asia session ahead of Portugal's auction, but has been unable to sustain the move higher so far in European trading. U.S.-German two-year spread continues to move in the euro's favor, and so euro upside may still be tested near term. We remain negative on the euro longer term given ongoing developments in the periphery.

Sterling is underperforming after the U.K. trade gap widened to record levels, with cable pulling back from a high just below 1.57. The yen is trading flat on the day as robust trade numbers had little impact. Elsewhere, SEK has been the strongest performer against the dollar in the G10, while the AUD is firmer despite comments from a Reserve Bank of Australia member that gross domestic product could be impacted by up to 1% due to the Queensland floods. Emerging-market currencies were largely firmer on the day, led by HUF and RUB.

Portugal's bond auction went well and helped peripheral spreads decline. Greece's 10-year yield was down 24 basis points while Spain and Ireland's yields both dropped by 5 basis points. Elsewhere in Europe, German yields were higher even though its five-year note auction was also received well. Belgium 10-year yields fell after it reported a marked narrowing in the budget deficit last year. U.K. 10-year yield was up 5 basis points, while the 10-year Treasury yield rose 4 basis points.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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