Dollar stronger against Euro and Yen
On Friday the Dollar witnessed a jump against both Yen and Euro, boost up by the news that American government is working on a plan to deal with the bank assets those are main source behind the credit problem. Mr. Henry Paulson who is American Treasury Secretary and Mr. Ben Bernake who is the Federal Reserve Chairman will be planning to work on a plan throughout the weekend that will be mainly focused on the how to deal with the liquid assets.
These assets are the main reason behind the breaking of the balance sheets of the banks and this week pushed Lehman Brothers to file for the bankruptcy protection and it also encouraged the bailout of American International Group. According to this plan there will be a setting up a fund for purchasing troubled bank assets like RTC (Resolutions Trust Corporation) that can be put into use to clean up bad debts from the savings and loan crisis that took place during 1980s.
According to Mr. Masafumi Yamamoto who is the chief of foreign exchange strategy of Japan at Royal Bank of Scotland, the investors made the purchase of the dollar trusting that the new systems will prove beneficial in solving problems in the financial structure rather than managing with the issues at personal financial firms. Mr. Masafumi also added that this news will ease out the investor’s problems over risk assets along with the purchase of the dollar.
The dollar index which keeps a record for the performance of American currency against six of the main currencies was up by 1.2 percent and was at 79.048. The Euro fell down 1.3 percent from late American trade at $1.4159 extending its drop by Thursday’s two week high of $1.4542. The Dollar increased 1.6 percent to 107.10 which showed an increase of one yen from the day’s low of approximately 105.40 yen.
But the fact remains unchanged that the financial market was wobbly even after the Federal Reserve and main central banks tried their best to push billions of dollars in the international market to normalize funding problem. This week following the falling down of Lehman Brothers and bailout of anxious insurer AIG worsened the whole situation in the financial market as the banks refused to lend amongst each other.