USD up on government help for Fannie, Freddie

Story link: USD up on government help for Fannie, Freddie

The US dollar gained ground on the euro Monday after the Federal Reserve gave troubled mortgage lenders Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) permission to borrow directly from the New York Fed and after US Treasury Secretary Henry Paulson asked Congress to grant the Treasury its consent to buy stakes in both lenders and to increase the lenders’ line of credit.

Gains for the dollar moderated, however, after Freddie Mac sold $3 billion worth of discount notes.

In late-morning trade in New York, the US dollar traded at $1.5902 to the euro while it took ¥106.3 to buy a dollar.

The euro was hurt by speculation that Europe’s economic slowdown is worse than that in the United States and that consequently the European Central Bank will soon have to cut Eurozone interest rates.

Meanwhile, the Australian dollar gained on the greenback on the chance that the Australian economy will not be hurt by losses for US banks, with an Aussie worth 97.18 cents US.

The South African rand strengthened on gains in equities and even after the Finance Minister wrote that his nation’s current-account deficit will likely remain large.

At just before noon in New York, the rand traded at R7.6355 to the US dollar after going as high as R7.6142, while it was at $12.141 to the euro and it took ¥13.920 to buy a rand.