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Financial Crisis: The Bailout Plan is almost there

Mon, Sep 29 2008, 07:15 GMT
by Marina Schiaffino

FXstreet.com


Dollar/EuroCongressional leaders have finally agreed on a draft that will allow the US Treasury to buy up to $700 billion of troubled debt securities from the banks. Still, the Bailout Plan has yet to be approved by the Congress and by US President George W. Bush.

There is still a lack of clarity with respect to what the government will pay to acquire the toxic assets, but the Treasury will release more details within 45 days.

The last banks to have suffered the effects of the crisis have been Bradford & Bingley and Fortis, which have been nationalised; while one of the biggest banks in the US, Wachovia, is in talks to be bought.

Tatsuya Kawanishi, junior advisor at FXstreet.com states that "reaching an agreement of the Bailout plain has prevented further degeneration of the situation. Greenback has being slightly lifted back as the worst-case scenario that would crash the financial system was avoided. The appreciation of the USD, however, would be limited, while sowing initial fears of looming financial unrest in the global market."

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Analyst Comments

  • Marjit Sahota, senior currency strategist at HIFX
    The Royal Gazette - "The market has been waiting patiently all week. Most people are quite confident there'll be a positive resolution to the bailout plan. If the deal goes through, the dollar will benefit... There will be a renewed expectation that the Federal Reserve won't be looking to ease interest rate policy further."
  • Andrew Busch, global FX strategist at BMO Capital Markets
    The Royal Gazette - "There's a tremendous amount of uncertainty regarding the bailout plan. (But) we've seen the dollar come back from the lows on the optimism of getting a deal done. I'm fairly certain we're going to see an agreement over the weekend."

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