USD Rebounds on Govt Action
by Korman Tam
9/18/2008 11:00:00 PM
The dollar edged higher in early Friday trading, rising above the 106-figure versus the yen and pushing the euro lower toward the 1.42-region. A relief rally in US equity bourses reversed earlier losses, with the Dow Jones Industrial Average closing the Thursday session 3.86% higher and the Nasdaq up by 4.78%. The advance in the greenback and stocks was prompted by discussions for the creation of a government-sponsored entity that would remove "the illiquid assets on bank balance sheets that are the underlying source of the current stresses in financial institutions and financial markets". In doing so, the government aims to restore confidence in the recently battered financial industry following the string of failures and halt any additional fallout on the already slumping economy.
Global central banks announced coordinated efforts to pump massive amounts of liquidity into the financial system to alleviate "continued elevated pressures in the US dollar short-term funding markets". The BoC, BoE, ECB, SNB, BoJ and Federal Reserve increased their swap lines to provide improved liquidity in both term and overnight operations by more than $180 billion.
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