Dollar up as U.S. reassures on big mortgage lenders

Eric Burroughs
Reuters
Monday, July 14, 2008

The dollar inched up from near a record low against the euro on Monday after the U.S. Treasury and Federal Reserve launched emergency measures to restore investor confidence in embattled U.S. mortgage lenders Fannie Mae and Freddie Mac The Treasury boosted its direct credit lines to the companies that fund half of all U.S. mortgages and said it would buy their shares if necessary, while the Fed said its direct lending window to financial firms was available to them.

Both Fannie, Freddie and their regulator repeated that they had adequate capital and plenty of access to liquidity in what has become the latest chapter in the year-old credit crisis spawned by swelling defaults on U.S. subprime mortgages.

Highlighting the ongoing housing debacle in the United States, federal regulators seized mortgage lender IndyMac Bancorp in the third largest bank failure in the country’s history.

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The doubts about the health and capital strength of the mortgage financing giants have spooked dollar-holders since their about $5 trillion of bonds are held by so many investors around the world, especially central banks in Asia.

Reports last week raised the prospect of the U.S. government nationalising Fannie and Freddie if their financial condition worsened.

Treasury Secretary Henry Paulson noted in a statement that the bonds of Fannie and Freddie were held “around the world,” an acknowledgment to some analysts of the important role their massive debt plays for the dollar.

“At the end of the day, the holders of agency debt are significantly in overseas hands and foreign central banks. They had to do this because confidence could weaken further, and that would be very, very bad for the dollar,” said Sharada Selvanathan, a currency strategist at BNP Paribas in Hong Kong.

“There’s still going to be a lot of concern about the dollar,” Selvanathan said.

Russia’s central bank said over the weekend it was happy with its holdings of roughly $100 billion of agency bonds, but other central banks stayed mum.

As of mid-2007, China and Japan were the biggest long-term agency bondholders at $376 billion and $228 billion respectively, according to U.S. Treasury data.

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8 Responses to “Dollar up as U.S. reassures on big mortgage lenders”

1. Hugo in Montreal Says:
   July 14th, 2008 at 5:47 am

   Well, this is from Oanda at 8:45h am ET:
   07/08/2008 0.63830000
   07/09/2008 0.63710000
   07/10/2008 0.63710000
   07/11/2008 0.63550000
   07/12/2008 0.63200000
   07/13/2008 0.62770000
   07/14/2008 0.62760000

   Dollar up?????????? Where????? This is only propaganda from Reuters!!!

2. Hugo in Montreal Says:
   July 14th, 2008 at 5:54 am

   Precision.. this is US dollar VS Euro!!!

3. Ed Bradley Says:
   July 14th, 2008 at 7:43 am

   In 2001 the US dollar would buy 1.65 Canadian. Today that is hovering around an even exchange. Now the feds and the treasury are borrowing dollars from a bank cooperative who cost for the dollars is just pennies. (the cost of ink and paper) These dollars create our national debt but printing these also cause weakness in our dollar. Add to all this that we are bailing out the second largest bank bail out and Freddie and Fanny and the GNP is not getting any better.

   Just consider that when the dollar loses 50% of its value it takes two dollars to equal the one of just ten years ago. In reality every user of American currency has without due process paid a very real but indirect TAX!!!

   Can any one tell me which of the rights in the original Bill of Rights remain as intended by our founding fathers! I don’t see that you can.

   Everyone, every time communicate with your congressmen when you get disturbed with what they do. The other path will be very costly.

4. Keynes Says:
   July 14th, 2008 at 7:57 am

   @Ed Bradley,

   Exactly, inflation = hidden taxation.

   Besides, it is getting ridiculously obvious that the stock exchange indexes are heavily manipulated. Probably by Paulson and his plunge protection team. Whatever the seriousness of the economic bad tidings, the next day Wall street has magically ‘recovered’ from their losses.

   The real magnitude of the financial crisis is still kept under water. Only people in ‘the know’ have left for a safe harbor. Joe average will have to pay for this created perfect storm with his lifesavings.

   It is truly sickening…

5. Ken Smith Says:
   July 14th, 2008 at 12:03 pm

   Good post, Hugo.

   Either Eric Burroughs is an incompetent journalist or Reuters is indeed engaged in propaganda. Even before I got to the end of the article, I was beginning to wonder why no actual figures were given. How can there be a news story with the headline “Dollar up”, but with no actual numbers?

   The dollar/euro exchange rates for the past week in Hugo’s post above are accurate. Here is a graph from that shows the dollar/euro rates for the past 120 days:

   http://www.x-rates.com/d/EUR/USD/graph120.html

6. Hugo in Montreal Says:
   July 14th, 2008 at 1:14 pm

   Man, I’d like to suck Alex Jones’ small cock.

7. Hugo in Montreal Says:
   July 14th, 2008 at 1:18 pm

   I want to suck Alex Jones’ tiny penis.

8. Sane Says:
   July 14th, 2008 at 1:20 pm

   Are those two retards (the Watson stooges—who can’t write for shit) still writing for this propagandist website?

   P.S.

   I agree with you Hugo: I’d like to give Alex some juicy head even though his cock is so small–I guess that’s what you get when you’re grossly obese.