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Dollar up on Bailout Plan approval

Thu, Oct 2 2008, 11:07 GMT
by Benny Menashe

Finotec Group Inc.

The dollar strengthened on Thursday, nearing a one year high against a basket of major currencies, after the United States Senate passed a $700 billion bank bailout package. However, there is still uncertainty as to whether the plan will be approved by the House of Representatives after its initial rejection at the start of the week. The greenback was up against both the euro and pound as the credit crunch has continued to take its toll on European banks. There was also increased demand for the dollar from outside the U.S as banks were reluctant to lend to each other. At 9.00am GMT EUR/USD was trading at 1.3919.

Meanwhile sterling fell against the dollar after data on house prices was released showing the largest drop since 1991. Nationwide Building Society released a report stating that property values fell by 12.4% from last year, in line with expectations. Eyes will be on the BoE quarterly survey on credit conditions today. The report may add to speculation that the Bank of England will cut rates in the near future. ``The U.K. economy is on the brink of a recession,'' economists in London at Daiwa Securities SMBC Co., wrote in a research report. ``A move next month does look to be on the cards now, and this will herald an aggressive easing of policy through 2009.'' Sterling was trading at 1.7667 at 9.00am GMT

In the euro zone today investors will be watching the rate decision of the European Central Bank. The expectation is that interest rates will be held at 4.25%. However, there is growing sentiment that ECB President Jean-Claude Trichet is struggling to combat inflation while at the same time keeping Europe’s economy from stagnating. There is increased likelihood that rates will be cut in the future as the financial crisis has halted growth but reduced inflation in Europe.

Today's Economic Events

Published on  Thu, Oct 2 2008, 11:16 GMT