Dollar Gets a Slight Bounce, but Optimism over Fannie/Freddie Quickly Wears Off
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In the currency market, the dollar lost much of its early gains against the euro, but managed to hang on in positive territory. Late Monday, the euro was trading at $1.5904 vs. $1.5931 on Friday.
The market at first reacted enthusiastically to weekend developments, in which the Treasury Department and the Federal Reserve moved jointly to back up Freddie Mac (FRE) and Fannie Mae (FNM), but that good cheer rapidly wore off as the day wore on.
Significantly, the stock prices of both companies continued to fall yesterday.
“It would seem that it’s not so much the ability of the Fed to act as a backstop that’s the issue. In itself that’s a dollar-positive factor,” said Andrew Wilkinson, senior market analyst at Interactive Brokers.
No, he went on, “The drag on the dollar is the reality that two largest housing lenders might need to call on the Fed to play ball. With a persistence of the underlying problems traders are in no mood to go long the dollar despite clear signs of slowing growth in Europe and a taming of inflationary pressures in the U.K.”
And Neil Mellor, a currency strategist at Bank of New York Mellon, wrote that the government’s actions do nothing but “plug the latest leaks in the U.S. financial system.”
Mellor added that, “In fact, if anything, the plans simply serve to underline the severity of the sector’s problems.”
Source: Dollar Gets a Slight Bounce, but Optimism over Fannie/Freddie Quickly Wears Off
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Tags: Doug Casey, euro, Federal Reserve, FNM, FRE, US dollarAbout the Author
Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.