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Dollar Declines As Lawmakers Defeat US Govt's Rescue Plan

 
   By Dan Molinski 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--The dollar declined broadly Monday after the U.S. House of Representatives defeated a $700 billion Wall Street rescue plan and stock markets tumbled.

The House voted down the measure by a vote of 205 for, 228 against.

The Dow Jones Industrial Average dropped more than 600 points as the votes were being tallied, but has since recovered some and was down 571 points in recent trade.

That led to sharp risk aversion and general dollar-selling, pushing the dollar to as low as Y104.20 against the yen. The euro climbed more than one U.S. cent, but remains lower on the day following signs that a banking crisis is enveloping Europe as well.

"It's very nerve-racking, I think most people felt the congressional bill would be supported," said Thomas Benfer, director of foreign exchange at BMO Capital Markets. "It's all frenzy at this point - very emotional trading."

He added that the swings in the currency market, with the dollar largely turning around its earlier gains against the euro, is symptomatic of very low liquidity in currency markets.

"Basically it's just customer driven. If a customer asks for a price - you sell it. But as far as speculating and position taking, it's extremely low," Benfer said.

Oil is also dropping amid the volatility in markets, with crude futures dropping to about $96 a barrel. This is providing some support for the dollar, preventing a sharper decline.

Monday afternoon in New York, the euro was at $1.4515 from $1.4614 late Friday. The dollar was at Y104.25 from Y106.20, according to EBS. The euro was at Y151.40 from Y155.15. The U.K. pound was at $1.8159 from $1.8412, and the dollar was at CHF1.0842 from CHF1.0896 Friday.

-By Dan Molinski, Dow Jones Newswires; 201 938-2245; dan.molinski@dowjones.com

(Riva Froymovich contributed to this story.)

(END) Dow Jones Newswires

September 29, 2008 14:19 ET (18:19 GMT)


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