NEW YORK—The dollar fell against the euro, and continued declines against other major currencies, as European bond yields dropped in the wake of well-received Spanish and French auctions.
The dollar index, which tracks the U.S. unit against a basket of major currencies, fell to 78.14 from 78.345 late Wednesday.
The euro recently rose to $1.3487 compared to $1.3445 late Wednesday. The euro topped $1.35 after Spain sold €3.75 billion ($5.04 billion) of government bonds, meeting its target. Spain saw yields rise, but demand was solid.
"Although investors are happy to buy Spanish debt, it could be a long time before sovereign problems in Europe are stabilized allowing for a meaningful drop in borrowing costs for Europe's most financially troubled states," said Kathleen Brooks, research director at Forex.com.
France also received strong demand for €4.3 billion of debt. Yields were mixed, with 10-year borrowing costs falling.
"This is also helping to alleviate pressure on German yields, as Germany needs France to be financially healthy to share the burden of saving the euro zone," Ms. Brooks said.
Meanwhile, the dollar was at ¥77.79 compared with ¥77.63 and the euro traded at ¥104.82 from ¥104.18. The pound bought $1.5715 from $1.5705, while the dollar fetched 0.9116 Swiss franc from 0.9132 franc.
On Wednesday, the dollar fell against several major currencies after the Federal Reserve teamed up with the European Central Bank and other major central banks to slash the cost of dollar swap lines in the face of rising dollar funding costs for European banks.
"We are uncertain [in regards to] the longevity of the sentiment improvement on the back of the central bank liquidity measures, but in terms of euro bond issuance, the relatively successful auctions in France and Spain have supported euro sentiment,"said Jeremy Stretch, currency strategist at CIBC in London."
The dollar index gained 2.9% in November, reversing most of the prior month's decline, as investor confidence in European leaders' willingness and ability to tackle the region's sovereign-debt problems waned, pushing up yields in some of Europe's bigger economies and bond markets, including Italy and Spain. The euro fell 3.5% in November.
Also on the radar Thursday, the purchasing managers index for the euro-zone manufacturing sector confirmed a further contraction in activity, highlighting expectations the region will move into recession, analysts said.
The manufacturing PMI reading for Britain showed further contraction, but came in above expectations at 47.6. Also, the Bank of England released its second-half financial stability report, warning that the risks from the euro-zone debt crisis and the banking sector pose the biggest threats to the country's financial stability.
