The U.S. dollar was trading broadly lower as the details of the Irish bailout emerge with Ireland seeking around €95 billion in aid. The euro is up vs. the greenback after making an early high of $1.378 but subsequent gains were stymied by sovereign account, along with option-related selling around $1.38.
Sterling participated in the early morning rally as well, nearly reaching the $1.61 level but fell back as investors remain skeptical over the rest of the periphery. The dollar is flat vs. the yen as the market continues to trade sideways.
Elsewhere, the unexpected downgrade to negative from stable in New Zealand's ratings outlook by S&P saw the New Zealand dollar take a hit, so some follow-through could be seen in the days ahead. The New Zealand dollar is, in fact, the weakest performer in the G10.
European sovereign bonds yields continued to moderate on the back of the Irish bailout news yet the focus is already starting to shift on the other vulnerable countries as Portugal's 10-year increased by 4 basis points. On the other hand, Irish 10-year yields are down 24 basis points along with a 5-basis point decline in the Italian 10-year.
In addition, Greek 10-year yields are up 12 basis points, the most since early September. Meanwhile, following a €2.9 billion auction of zero coupon 12-month bills, 10-year German yields are down 2 basis points with the 10-year and two-year U.S. Treasury flat.
