In the currency market, the dollar slipped against the euro. Late Monday, the euro was trading at $1.4702 vs. $1.468 on Friday. Analysts at Brown Brothers Harriman wrote that the broad fundamental outlook in favor of the U.S. dollar remains in place, although downward data surprises could weigh on the currency.

“The question now is to what extent profit-taking on long dollar positions occurs. The corrections will provide investors with an opportunity to go long the U.S. dollar,” in their opinion.

The National Association of Home Builders/Wells Fargo housing market index remained stuck at a record-low 16 in August, in line with economists’ expectations. The report suggests that U.S. home builders were as gloomy in August as they’ve ever been about the housing market.

And rumors about the potential recapitalization of Fannie Mae (FNM) and Freddie Mac (FRE) savaged the companies’ stocks. Citing Bush administration insiders, the newsweekly Barron’s reported that if Fannie and Freddie don’t raise fresh capital, the government is likely to undertake its own recapitalization, “with Treasury infusing taxpayer money into the enterprises.”

The capital infusion would involve preferred stock carrying such seniority, dividend preference and convertibility rights that the existing common shares of both companies “effectively would be wiped out,” Barron’s concluded.
Source: Dollar declines – Homebuilders Remain Gloomy; Fannie/Freddie Bailout could Wipe Out Stockholders