Lender worries hurt USD

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Worries about the fate of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the two biggest mortgage lenders in the United States, reverberated through currency markets on Friday as investors failed to be moved by statements from US Treasury Secretary Henry Paulson an US President George W. Bush that the government is working hard on making sure that the two lenders can continue operating in their current form.

Both lenders lost substantially again, with Fannie Mae down 28 percent in early afternoon trade in New York and Freddie Mac losing another 24 percent, on concerns that shareholders in the two will lose all their money even if the government bails them out.

The greenback was also hurt as crude oil prices rose to a new record over $147 per barrel on continuing concerns about events in Nigeria and the Middle East as well as on concerns about a strike in Brazil.

The US dollar fell as far as $1.5847 to the euro and was trading at $1.5887 to the euro at just past 2 p.m. in New York while at the same time it took ¥106.2700 to buy a dollar.

The shared currency was also lower in relation to the yen, as it took ¥168.8310 to buy a euro.

The Australian and New Zealand dollars gained in relation to the greenback on speculation that the Fannie Mae/Freddie Mac situation will make it less likely that the US Federal Reserve will raise interest rates anytime soon.

The Aussie, which was also helped by gains in commodities prices, was worth 96.57 cents US while it took 76.09 cents US to buy a New Zealand dollar.

The South African rand was hurt by risk avoidance by investors in which the troubles for US mortgage lenders was a factor.

The rand traded lower at R12.216 to the euro but was a bit higher versus the greenback at R7.6885 to the dollar.