US Dollar Gains against Major Currencies

The U.S. Dollar edged slightly against major currencies following the announcement of the U.S. Government-Sponsored Enterprises “GSE” rescue package for Fannie Mae and Freddie Mac.  On Monday, the U.S. Treasury announced an emergency plan intended to restore confidence in the financial market, as investors are beginning to question the financial health of the two largest mortgage lenders in the United States which, together, control 50% of all mortgage lending activities in the U.S.  The rescue plan calls for the provision of direct credit lines by the Treasury and the possibility of the Treasury buying their shares.  In addition, the Federal Reserve will make available to the two institutions, access to the direct lending window, which is normally available only to financial institutions.

While this plan managed to calm financial markets, investors are still concerned about the U.S. housing and financial sector, as these two institutions are the bigger players.  However, analysts warn of the potential cost of the rescue package and the fact that this plan will not cure the underlying problems.

On Monday, July 14, 2008 at 07:23 GMT the Euro fell by 0.45% against the U.S. Dollar to $1.4867 while the U.S. Dollar rose against by 0.39% against the Japanese Yen to 106.58 Yen.