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Daily Market Overview Dec 17

The dollar declined against the yen and the euro in Asian trading Friday, with investors unwinding positions ahead of the weekend as recent rises in U.S. Treasury yields showed signs of easing.

Investors have piled up large dollar positions in recent days in expectation of the U.S. unit's ascent as bond rates rose.

The benchmark 10-year Treasury bond yield touched 3.568% Thursday in New York, a level last seen May 13, but then began to edge back down, reaching 3.424% as of 2310 GMT from 3.440% at 1910 EST.

The dollar was trading at JPY83.91 as of 2350 EST from JPY84.03 late Thursday in New York. The euro meanwhile was at USD1.3290 from USD1.3232 and at JPY111.50 from JPY111.20.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 79.814 from 80.043.

The British Pound bounced off of recent lows, boosted by a stronger-than-expected UK Retail Sales report and improvement in UK interest rate forecasts. Upward revisions to previous months' data provided a spark to Bank of England expectations, and traders now price in 44 basis points of interest rate increases in the coming 12 months.

The Australian dollar nudged higher Friday in what is rapidly thinning holiday season trading, but some forecasters are already looking into 2011 and saying the year may bring a reversal of fortunes for the currency.

The EURUSD breaches the USD1.3300 level, around which traders said stop-loss buying orders accumulated, marking an intraday high of USD1.3326 compared to 1.3282 earlier. The pair may rise to USD1.3350 as players unwind USD-long positions ahead of the weekend as recent rises in U.S. Treasury yields showed signs of easing, say analysts.

Investors are paying close attention to developments from the European Union summit ending later in the day for clues on how leaders are going to deal with European sovereign debt concerns, but some say any tangible developments from the summit are unlikely.

Sterling, now flat against the dollar and lower against the euro, is likely to hold steady against the dollar, while players look for an entry point to buy against the euro, depending on the E.U. summit news.

European stocks are expected to open largely flat as investors hold their positions awaiting the outcome of the meeting of European Union ministers gathering in Brussels for a two-day summit to discuss the problems surrounding Europe's sovereign-debt problems.