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Daily FX Commentary

Mon, Sep 22 2008, 10:25 GMT

Investica Ltd


Dollar loses support

The US Treasury confirmed on Friday that it would set up a vehicle to buy bad mortgage-related debts from the banking sector. There will be greater optimism that the authorities will finally be able to alleviate stresses within the markets and underpin the banking sector. Political negotiations will continue to be watched very closely this week.

After securing initial strength on Friday, the dollar then weakened sharply. The Euro secured strong gains against the Japanese yen as risk aversion eased and this also put upward pressure on the currency against the dollar. As stop-losses were triggered, the trend accelerated in New York.

The US Federal Reserve also confirmed that there would be additional support measures for the US financial sector with the Fed extending loans to buy asset-backed commercial paper to safeguard money-market funds.

As well as trends in risk aversion, there were increased fears over the cost of the bailouts. Treasury Secretary Paulson confirmed that the cost would likely to be hundreds of billions of dollar and could be as high as a trillion dollars.

The dollar weakened to lows beyond 1.4450 in US trading and tested support levels beyond 1.45 on Monday.

Published on  Mon, Sep 22 2008, 10:26 GMT


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Investica Ltd http://www.investica.co.uk | tim.clayton@investica.co.uk

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