Euro, pound gain on pledges of help to banks

Story link: Euro, pound gain on pledges of help to banks

The euro saw gains Monday on promises by Eurozone officials to guarantee through the end of 2009 bank-debt issues with maturity dates up to five years and after G-7 leaders pledged to do everything necessary to fix credit markets after their meeting in Washington, D.C.

The pound also saw gains, with its jump in relation to the US dollar its biggest in 12 years, but the greenback declined after the Federal Reserve said that the European Central Bank, the Bank of England, and the Swiss National Bank will offer banks unlimited access to US currency, answering the demand for loans in dollars.

Access to those dollars from the banks will be through auctions with maturities of seven, twenty-eight, and eighty-four days at fixed rates.

The announcement of the unlimited availability of dollars sent interbank loan rates for three-month dollar loans from 4.83 percent down to 4.75 percent.

In late morning trade in New York, it took $1.3576 to buy a euro, while the shared currency was worth ¥137.0361.

The dollar was little changed versus the yen at ¥100.94, but the US currency was lower versus the Australian dollar to trade at 67.85 cents US to the Aussie while at the same time the Brazilian real had gained to R$2.3130 to the greenback and the Mexican peso was up to 12.366 to the dollar.

The pound gained on both the dollar and the euro after the UK government pledged £37 billion ($64 billion) to bail out the Royal Bank of Scotland (LSE: RBS; NYSE: RBS PRM), HBOS (LSE: HBOS) and Lloyds TSB (LSE: LLOY).

In return for the cash infusion, RBS and HBOS will give majority control to the government and install Prime Minister Gordon Brown on their boards of directors.

At late morning in New York, the pound traded at 78.03p to the euro, while it took $1.7395 to buy a pound.