Dollar Soared on ECB Financial Statement - 29.12.2011

US Dollar Stocks dived globally amid increased concerns about the European debt crisis. Asian stocks followed yesterday’s losses of the major European and US stock indices. Japanese Nikkei Stock Average dropped 0.3% to 8398.89 by the end of the trading session today, while US S&P 500 fell 1.25% to 1249.64 yesterday. At the same time investors boosted demand for the US currency and US Treasuries. The yield on the benchmark 10-year government notes decreased to 1.92% from 2%. The dollar index rocketed above 80 and reached its highest level since December 15 – 80.60. Euro The single currency depreciated dramatically touching its 10-year low against the Japanese yen - 100.35 - in Asian trading hours today. At the same time the euro dived below 1.30 against the US dollar, to 1.2887, coming to a halt several basis points above its 2011 low at 1.2873. The move has been mainly triggered by the European Central Bank weekly report that showed the bank’s balance sheet soared to a record 2.73 trillion euros as a result of lending to banks last week. The figure increased by almost 240 billion euros mainly due to longer-term refinancing operations. The currency fell despite relatively positive results of Italian debt auctions yesterday. The Treasury sold 9 billion euros of 179-day bills at a rate of 3.251%, compared with 6.504% at the previous auction, and today it is scheduled to offer 8.5 billion euros in notes maturing in 2014, 2018, 2021 and 2022. On the secondary market however Italian 10-year yields were little changed, staying close to 7%. Australian, Canadian Dollar Both the Australian and the Canadian currencies dropped yesterday against the greenback. In Asian trading hours the Aussie and the Loonie touched their one-week lows as investors moved to less risky assets after the ECB reported record figures on its balance sheet. The Australian dollar fell to 1.0044 from yesterday's high 1.0202, while the US dollar rose from yesterday’s 1.0125 to 1.0267 against the Canadian counterpart.