Tuesday, February 10, 2009

Dollar up as Obama plans move forward

The dollar got an early boost against most foreign currencies Tuesday before the Obama administration was set to unveil an overhaul of the financial rescue plan and the Senate appeared ready to pass its economic stimulus bill.

The euro fell to $1.2971, down 0.3% from $1.3003 late Monday.

The pound also fell against the dollar, buying $1.4798, down 0.7% from $1.49.

The dollar fell against the yen, however, dropping 0.2% to ¥91.284 from ¥91.47 late Monday.

The dollar has been in an upward trend against the euro and pound since the summer, though it has fallen against the yen during that period. Currency strategists say traders have been rewarding currencies of nations that are promoting the strongest economic recovery efforts.

Accordingly, the dollar fell slightly against the euro and pound Monday after both the stimulus and bank bailout plans faced delays. But traders supported the U.S. currency again Tuesday ahead of a vote and an announcement of two key elements to President Obama's recovery effort.

Treasury Secretary Tim Geithner is scheduled to detail a revision to the financial system rescue plan in an 11 a.m. ET speech Tuesday. President Obama said at a press conference Monday night that Geithner would provide "very clear and specific plans" for loosening up credit markets.

"There is some expectation of positive flows after the Geithner announcement, so traders are buying dollars in anticipation," said Dustin Reid, senior currency strategist at Royal Bank of Scotland.

Reid said traders are betting that Geithner's announcement will provide some relief to the credit markets. But the dollar could fall back if investors are unconvinced that the plan will succeed.

"In general, the theme should continue, but if the plan lacks a lot of detail and there is still some confusion, it might not necessarily work like it has in the past," he said.

A vote on final passage of the Senate stimulus bill - with an estimated pricetag of $838 billion - is scheduled for Tuesday. Negotiators from the Senate and the House of Representatives would then have to hammer out a single bill from their differing versions, but Senate Majority Leader Harry Reid, D-Nev., said he expected that could be done by Friday.

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