Dollar down as treasury auction disappoints

The dollar fell to one-week lows against the euro and Swiss franc today after surprisingly poor results at a US Treasury auction…

The dollar fell to one-week lows against the euro and Swiss franc today after surprisingly poor results at a US Treasury auction and losses on Wall Street in the previous session.

A better-than-expected US services sector report failed to give lasting support to the dollar as stocks turned tail after the sale of $24 billion in three-year notes as part of $60 billion quarterly refinancing drew a tepid response.

This drove the yield on the benchmark 10-year bond higher, sparking concerns higher borrowing costs could hinder a pick-up in the US economy.

"There are worries about the fixed-income market because the auction wasn't healthy and that's feeding back into stock markets - it's bit of a chicken and egg problem because a re-rating of US growth is bringing higher yields," said Mr Trevor Dinmore, currency strategist at Deutsche Bank.

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The White House last month forecast that the federal budget deficit would rise to a record $455 billion in 2003 - and then $475 billion next year. Much of this is financed by non-US investors purchasing US assets such as stocks and bonds to the tune of over $4500 million per day.

By 8:30 a.m., the dollar had fallen to $1.1427 from a high yesterday of $1.1304.