Dollar Rises as U.S. Lawmakers Prepare to Vote on Bank Rescue


The dollar rose to a one-week high against the euro as Congressional leaders and President George W. Bush agreed on a $700 billion package to revive credit markets by purchasing distressed debt from banks.

The greenback also gained against the yen after Speaker Nancy Pelosi said the House may vote on the plan today. The British pound dropped to a one-week low versus the dollar on concern Bradford & Bingley Plc, Britain's biggest lender to landlords, will be taken over by another bank or nationalized today under a U.K. government-backed plan to protect 21 billion pounds ($38.5 billion) of customer deposits.

The U.S. currency rose to $1.4503 per euro as of 10:07 a.m. in Tokyo, from $1.4614 late in New York on Sept. 26. It reached $1.4483, the highest since Sept. 22. The dollar gained to 106.78 yen from 106.01 yen at the end of last week.

Against the pound, the dollar climbed to $1.8261, the strongest in more than a week, before trading at $1.8274 from $1.8445. It touched 1.0986 versus the Swiss franc, the highest since Sept. 22, from 1.0900.

The bank rescue plan would let the U.S. Treasury begin buying distressed debt securities from financial companies affected by the record number of home foreclosures.

The breakthrough in negotiations between Republicans and Democrats came during a weekend of talks aimed at reaching agreement before global financial markets reopen today. The package will give Treasury Secretary Henry Paulson an immediate $250 billion to purchase bad loans, with the rest to be doled out in stages.

The pound fell as Bradford & Bingley became the third major British bank to run into trouble since global credit markets seized up last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Group Plc on Sept. 18.

The euro also weakened on speculation additional European banks will require government support as share price declines hamper their ability to raise funds.


TradingEconomics.com, Bloomberg
9/28/2008 7:40:57 PM