Currency markets winding down ahead of holidays; oil extends losses

The dollar weakened against a basket of currencies in thin trading as the euro strengthened in the wake of an inconclusive election result that may increase unease over Spain’s financial stability. The euro was up 0.51 percent at $1.0920 against the dollar and rose 0.39 percent at 132.29 yen against the yen. The dollar lost 0.07 percent against the yen at 121.11 yen.

The dollar index was down 0.31 percent at 98.40. Given the broad consensus among many analysts and traders that the dollar will rise in the first quarter, the now minimal scale of those bets leaves room for some of the big money investors who have cashed up this month to buy back in. Among commodity- linked currencies, the Australian dollar was up 0.25 percent at $0.7187, while the New Zealand dollar was 0.64 percent higher at $0.6767.

Brent oil cratered to its lowest price in more than 11 years and remained locked within a narrow range, burdened by warmer-than-normal temperatures and a market lacking clear signals. The market, which has been plagued this year by an oversupply of crude oil and weakening demand, is continuing to face pressure going into 2016. Global oil production is running close to record highs and, with more barrels poised to enter the market from nations such as Iran and Libya, the price of crude is set for its largest monthly percentage decline in seven years. U.S. crude was last up 0.03 percent at $34.66 a barrel. Brent futures dropped 1.90 percent at $36.18 a barrel, falling as much as 2 percent during the session to a low of $36.04, their weakest since July 2004.

Gold rose more than 1 percent as weaker than expected U.S. data and uncertainty about how fast the Federal Reserve will tighten interest rates next year weighed on the dollar. Spot gold rose 1.12 percent to $1,077.76 an ounce, while gold futures for February delivery added 1.18 percent at $1,077.60 an ounce. “We understand the bearishness before the start of the interest rate hiking cycle,” Commerzbank analyst Eugen Weinberg said, adding that the metal was unlikely to fall further in the short term as the first rate rise was out of the way.

Long-dated Treasury yields edged higher after U.S. crude oil prices stabilized somewhat, leading to a marginal rise in inflation expectations, while other Treasury yields were little changed on caution ahead of year-end. Traders were cautious about making significant bets ahead of year-end because of the thin and potentially erratic trading environment, analysts said. Benchmark 10-year notes were last up 2/32 to yield 2.19 percent. 30- year bonds were last down 3/32 to yield 2.91 percent. Two-year notes were last up 1/32 to yield 0.95 percent.

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