* Swiss franc climbs to record high versus euro and dollar
* Dollar burdened by pullback in U.S. yields
* Moves comes in thin year-end trade
(Updates prices, adds details)
By Neal Armstrong
LONDON, Dec 30 (Reuters) - The Swiss franc hit record highs
versus the euro and the dollar on Thursday, bolstered by its
safe-haven status and lower U.S. bond yields in thin year-end
trade that exaggerated price swings.
The dollar weakened broadly, hitting a seven-week low
against the yen and a 28-year low against the Australian dollar
as traders took the falls in U.S. bond yields as a cue to sell.
U.S. Treasury prices recovered on Wednesday, pushing yields
sharply lower, after a $29 billion auction of seven-year notes
drew surprisingly strong demand. [].
The euro continues to smart from concerns over debt
financing in the currency bloc's peripheral countries, giving
investors cause to seek the relative safety of the Swiss
currency.
"The franc is a hedging vehicle for euro zone risk and we
need some degree of resolution to concerns about credit risk in
the euro zone periphery to stop it grinding higher," said Ray
Farris, currency strategist at Credit Suisse.
"The dollar is a weak currency and it will continue to
weaken against those currencies that aren't actively trying to
disqualify themselves from being an alternative to the dollar,
which right now includes the Swiss," he said.
The euro fell as low as 1.2398 francs <EURCHF=> after a
Swiss bank targeted an option barrier at 1.2400, before bouncing
back to trade at 1.2434, down 0.6 percent on the day.
The dollar fell to 0.9371 francs <CHF=> as the euro/Swiss
barrier gave way. It was last at 0.9381, sitting with losses of
0.8 percent on the day. Swiss implied volatilities ticked higher
with the one-month dollar/Swiss franc <CHF1MO=> trading around
11.80 percent, a level last seen in the middle of November.
The moves came in a thin market with many players sidelined
until the new year.
"FX trading activity remains highly subdued in the
prevailing holiday market, and this cautions against reading too
much into the price action," said UBS analysts in a note to
clients.
The euro climbed to $1.3260 <EUR=> after refusing to break
below its 200-day moving average, now at $1.3086, frustrating
bearish investors who think Portugal and possibly Spain could be
the next to be bailed out in the new year.
Italy placed most of its planned issue of bonds at a tender
on Thursday, although it cut the final sales of two papers and
was forced to accept broadly higher yields. []
DOLLAR/YEN NEAR 7-WEEK LOW
The dollar slipped as low as 81.28 yen <JPY=> in Asia, its
lowest in seven weeks and edging closer to a 15-year low of
80.21 yen hit in November. It later recovered to 81.42, still
down 0.3 percent on the day.
Traders now await weekly U.S. jobless claims report, Chicago
PMI numbers and pending home sales for November later in the
session. Any signs of further deterioration in the U.S. housing
sector, where foreclosures jumped in the third quarter, could
see the dollar come under more pressure.
Traders said a rise in the Chinese yuan after China's
interest rate hike last Saturday was supporting Asian
currencies, including the yen.
The yuan <CNY=CFXS> hit a record high against the dollar on
Thursday after the Chinese central bank set the yuan mid-point
<CNY=SAEC> versus the dollar at a record high. Chinese President
Hu Jintao visits the United States on Jan. 19 for a summit in
which the subject of the undervalued yuan is likely to loom
large. []
The Australian dollar hit a fresh 28-year high of $1.0198
<AUD=D4> against the U.S. dollar, though option barriers at
$1.0200 prevented further gains as it eased back to $1.0169.
(Additional reporting by Anirban Nag; Editing by Patrick
Graham, John Stonestreet)
