By Pin-Yu Liao
Dollar weakened versus the Euro after the U.S. government announced that there will be a bank rescue plan to buy 1 trillion of troubled assets.
The government developed a new plan called the Public-Private Investment Program, which will use tax funds from taxpayers and capital from private investors to buy illiquid mortgage backed securities and other loans in hopes to alleviate the financial crisis targeted at the banks. In this program, the $500 million will be spent on existing troubled assets and loans, those that are in default. It is estimated that 1 trillion will be withdrawn to rescue the banks. The decline in the dollar value is demonstrated in the Dollar Index. The Dollar Index showed that the dollar fell 0.2% against the Euro at $1.3614. The dollar dropped 0.5% versus the pound to $1.4541.
As a result, stocks soared with approximately 4% gain in major indexes, and home sales increased. Existing home sales increased 5.1% last month to the adjusted annual rate of 4.72 million million units.
Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, remarked, “The Geithner plan was very well received by the markets, as financials rallied strongly. The dollar should remain under pressure across the board.”
http://money.cnn.com/2009/03/23/markets/dollar/index.htm
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_ihMaIuO2M0
http://www.forbes.com/2009/03/19/weak-dollar-tight-credit-markets-john-tamny.html
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