Dollar lower on profit-taking (AFP)
09.09.2008 15:25 Finance
The euro rose to 1.4155 dollars in morning London trade from 1.4129 dollars late Monday in New York.
Against the Japanese currency, the dollar fell to 107.75 yen from 108.27 yen on Monday.
The yen rose against other major currencies as investors shed risky bets on credit market concerns despite the US government bailout of Fannie Mae and Freddie Mac over the weekend, dealers said.
Equity markets worldwide had surged on Monday and the dollar hit an 11-month high versus the euro after Washington's unprecedented takeovers sparked hopes of an easing of the US housing crisis and resulting credit crunch.
Foreign exchange market players were uncertain if the US plan would stave off further credit-related losses.
"The net result may be that the move has resolved some uncertainty -- about both the timing and precise details of any takeover -- but not to change very much more," Barclays Capital analyst David Woo said in London.
"A government bail out of some form had been widely expected, the key question had been when. It seems unlikely to make any meaningful change to the slowdown of global growth beyond some support for US growth.
"And while it does help the financial sector, it is far from curing all its problems. Banks are still part way through a prolonged period of consolidating their balance sheets," Woo added.
Market participants were looking ahead to July home sales data in the US to be released Tuesday. If the figures fall below market expectations, they could worsen the outlook for a recovery, dealers said.
Under the bailout plan, Fannie Mae and Freddie Mac will get government-appointed chief executives and shed their mission of shareholder profit. The Treasury agreed to inject 100 billion dollars if needed into each.
The massive government intervention aims to contain the damage from the worst housing slump in decades, which has rippled through the banking system and led to multi-billion-dollar losses for Fannie and Freddie.
But some traders said the plan could also become costly for the US taxpayer without repairing the fundamental problems of the housing market.
"There are many areas in the government's plan that remain unclear, and fresh concerns have cropped up over the US economy including its finances," said Chuo Mitsui Trust Bank chief strategist Yosuke Hosokawa.
"Markets are questioning: is the US really alright?"
In early London trading on Tuesday, the euro changed hands at 1.4155 dollars against 1.4129 late on Monday, at 152.28 yen (152.96), 0.8043 pounds (0.8034) and 1.5980 Swiss francs (1.5985).
The dollar stood at 107.75 yen (108.27) and 1.1303 Swiss francs (1.1311).
The pound was at 1.7579 dollars (1.7582).
On the London Bullion Market, the price of gold fell to 793.30 dollars per ounce from 808 dollars late on Monday.
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