CURRENCY ASIA
Dollar gains against yen in Asia on US mortgage bailout
Agence France-Presse
First Posted 11:34:00 09/08/2008
Filed Under: Economy, Business & Finance,Foreign Exchange Markets
TOKYO, Japan -- (UPDATE) The dollar gained against the yen in Asian trade Monday after US authorities bailed out two mortgage finance giants, easing investor worries over the future of global markets, dealers said.
The dollar firmed to 108.74 yen in Tokyo afternoon trade from 107.67 in New York late Friday. But the euro gained to $1.4407 from $1.4260 and to 156.66 yen from 153.57.
The US Treasury Department announced Sunday, when markets were closed, that it will put Freddie Mac and Fannie Mae under strict federal control and may invest up to a total of $200 billion in the two mortgage giants, dealers said.
Fannie Mae and Freddie Mac -- government-chartered, shareholder-owned firms that provide liquidity to the US housing market -- have been whipsawed by the financial meltdown in the past year.
The companies have lost some 90 percent of their value on fears of further losses from mortgage defaults by "subprime" customers, who were given loans despite patchy credit histories.
"Markets reacted positively at first glance to the news because it dispelled uncertainty about credit and fears of a worsening housing market," said Masatsugu Miyata, forex dealer at Hachijuni Bank.
After a volatile morning session, trade started to calm down "as investors were taking a second glance at the bailout plan and its details and are unsure whether it will solve the financial crisis. They are cautious," he added.
The US government plan could potentially cost taxpayers billions of dollars and Washington's decision to buy back preferred stock would mean common shareholders still risk losing millions of dollars, dealers said.
"Some players see expansion of debt on (the) US Treasury's balance sheet," which would ultimately hurt the dollar and US bonds, Jonathan Barrett, managing director of Commodity Broking Services in Sydney, told Dow Jones Newswires.
The market was further relieved by reports that South Korean and Japanese banking companies were considering investing in Lehman Brothers, one of the Wall Street banks worst-hit by the subprime debacle.
The euro firmed against the dollar as market players raked in profit from the single European currency's recent one-year lows against the greenback, dealers said.
But the rise did not signal a shift in market sentiment over the outlook in the euro zone, whose 15-nation economy contracted in the second quarter for the first time since the bloc's creation in 1999.
"There's no change in the macroeconomic picture," Mitsubishi UFJ Trust and Banking chief Hideaki Inoue said.
"Even if (the US bailout) manages to raise hopes that the US economy may bottom out, that could do little to ease anxiety over the economies of European nations," he added.
The pound firmed to $1.7923 from $1.7653 in Tokyo afternoon trade.
The Canadian dollar slipped to US$1.0572 from US$1.0591 after Prime Minister Stephen Harper called for snap elections Sunday.
The dollar slipped against most regional Asian currencies in morning session.
It slipped to 1.4184 Singapore dollars from 1.4318, to 31.60 Taiwan dollars from 31.88, to 46.31 Philippine pesos from 46.80, to 34.44 Thai baht from 34.57 and to 1,089.15 South Korean won from 1,118.30.
The greenback firmed to 9,255 Indonesian rupiah from 9,227.
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