Dollar Stronger Against Euro
Feb 24th, 2009 | By Doug Casey | Category: Financial NewsIn the currency market, the dollar rose against the euro. Late Monday, the euro was trading at $1.2718 vs. $1.2824 on Friday.
Traders supported the buck after the government said it would start a “stress test” on banks this week but would keep nationalizations at bay for now.
Also of interest was a Wall Street Journal story reporting that the government may take a 25% to 40% stake in Citigroup’s common shares to bolster the giant bank’s financial strength in the face of mounting loan losses.
Citing people familiar with the situation, the Journal said that while the talks could still fall apart, discussions center on the government converting a lot of its current $45 billion preferred equity stake into Citigroup (NYSE:C) common stock.
The deal could leave the government with 40% of the shares, but bank executives hope the stake will be closer to 25%, the Journal was told. Citigroup made the proposal to its regulators, according to the report, which also noted the Obama administration hasn’t yet indicated whether it supports the plan.
A stock conversion “would help boost the company’s low tangible equity ratio (currently 1.5%), which we believe is too low given Citi’s asset base,” wrote Stuart Plesser, of Standard & Poor’s Equity Research.
“Such a move would be more psychological than tangible, as no real capital would be added to Citi,” Plesser added. “But it might help ease investors’ concerns over the banking space.”
Source: Dollar Stronger Against Euro
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