The US government's bailout plan for the financial sector is having a dramatic impact on the US dollar. Bloomberg reports:
The dollar weakened the most against the euro since January 2001 on concern a U.S. proposal to buy $700 billion of troubled assets from financial firms will inflate the budget deficit.
The greenback dropped for a fourth day yesterday in its longest stretch of decline since June as Treasury Secretary Henry Paulson's plan to bail out banks from the credit crunch failed to restore investor confidence in U.S. assets...
The dollar traded at $1.4786 per euro at 6:20 a.m. in Tokyo, after dropping 2.1 percent yesterday, when it touched $1.4866, the weakest level since Aug. 22... The dollar was at 105.47 yen, following a 1.8 percent drop...
The Standard & Poor's 500 Index retreated 3.8 percent yesterday, led by regional banks that may get hurt by the bailout. Crude oil for October delivery rose 14.8 percent to $120 a barrel on the New York Mercantile Exchange. The more-active November contract rose $6.62.
The fall in stocks yesterday indicates some flight to safety. As further evidence, Treasuries held up well, as noted by Bloomberg.
Two-year Treasury notes rose for the first time in three days as stocks tumbled, bolstering demand for the relative safety of government debt while lawmakers consider a bailout of the U.S. banking sector.
Yields on two-year notes had surged the most in 23 years on Sept. 19...
The benchmark two-year note's yield fell 6 basis points, or 0.06 percentage point, to 2.14 percent at 5:02 p.m. in New York, according to BGCantor Market Data...
The 10-year note's yield fell less than 1 basis point to 3.83 percent, after surging 28 basis points on Sept. 19...
Still, a bailout should generally be positive for risky assets and negative for Treasuries and the US dollar. Markets will likely fluctuate over the next few days with the prospects for the bailout plan.
No comments:
Post a Comment