Dollar up as rescue plan emerges



The dollar nudged upwards against the euro and the yen on Monday, as a report of a rescue plan for a top US bond insurer reassured the market following recent turmoil, dealers said.

 

Dealers were also awaiting a fresh reading on the state of the troubled US housing market, with existing home sales for January published later Monday.

 

In European trading, the euro slid to $1.4812, from $1.4826 in New York late on Friday.

 

Against the Japanese currency, the dollar advanced to ¥107.79 from ¥107.14.

 

The dollar picked up after an initial subdued reaction to the reported bailout for Ambac, which is one of the largest bond insurers in the United States.

 

Ambac and other major bond insurers have been hard hit in the financial turmoil stemming from the US real estate crisis and a related credit squeeze.

 

The Wall Street Journal, citing people familiar with the matter, said Ambac is considering a plan to raise at least $2 billion (Dh7.3bn) by selling shares at a discount to existing investors in a bid to keep its AAA credit rating.

 

"The dollar got some boost from the report late Friday about the rescue package for Ambac," said David Cohen, director of Asian economic forecasting at Action Economics.

 

"It's one less thing to be nervous about and provides a relief for the troubled credit market."

 

The dollar ended last week on the defensive, weighed down by expectations that the US Federal Reserve will have to cut interest rates again sharply in March to ward off recession in the world's biggest economy, dealers said.

 

"The dollar's strength is a late reaction on Ambac," said Tim Condon, research head at ING Financial Markets.

 

Investors are waiting for the release this week of key US data for January, including existing home sales on Monday, new residential sales Wednesday and consumer spending on Friday, analysts said.

 

January existing home sales are expected to have fallen to an annualised 4.8 million properties after sales fell over two per cent to 4.89 million homes in December, Wall Street analysts predicted.

 

In Europe on Monday, the euro changed hands at $1.4812 against $1.4826 late on Friday, at ¥159.65 yen (¥158.94), £0.7538 (£0.7540) and CHF1.6152 (CHF1.6090).

 

The dollar stood at ¥107.79 (¥107.14) and CHF1.0905 (CHF1.0850).

 

The pound was at $1.9656 ($1.9662).

 

On the London Bullion Market, the price of gold climbed to $949.50 an ounce from $943 late on Friday. Last Thursday it hit a record high $953.91. (AFP)

Comments

Comments