Dollar mixed as banks announce emergency lending

31st July 2008, Comments 0 comments

The dollar was mixed Wednesday after the US Federal Reserve and European central banks said they would extend more credit to banks.

31 July 2008

NEW YORK - The dollar was mixed Wednesday after the US Federal Reserve and European central banks said they would extend more credit to banks still roiled by financial market turmoil.

The 15-nation euro slipped to USD 1.5574 in late New York trading from the USD 1.5586 it bought late Tuesday. The British pound rose to USD 1.9814 from USD 1.9794, while the dollar was unchanged at 108.10 Japanese yen.

In other New York trading, the dollar weakened to 1.0239 Canadian dollars, and inched up to CHF 1.0487 from CHF 1.0452.

The U.S. Federal Reserve said it is extending its emergency borrowing programme to Wall Street firms by USD 100 billion and is taking other steps to ease a severe credit crunch that has hobbled the US economy.

The Fed said the programme, under which investment houses can tap the central bank for a quick source of cash, will now be available through Jan 30. Originally the program, started on March 17, was supposed to last until mid-September.

The Fed also boosted its credit line with the ECB to USD 55 billion from USD 50 billion.

Meanwhile, the European Central Bank and Swiss National Bank said Wednesday they will make billions of U.S. dollars available to banks still starving for the currency.

The actions of the Fed, the ECB and the Swiss National Bank "should make it easier for the Fed to reach a conclusion on monetary policy at next week's FOMC meeting without conditioning policy on heightened financial strains," said Harm Bandholz, an economist with UniCredit.

"As a result, we expect the committee to leave rates at an unchanged 2.00 percent," Bandholz said.

Lower interest rates can weigh on a nation's currency as traders transfer funds to countries where they can earn better returns.

[AP / Expatica]


 

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