Dollar falls against euro, pound

Government efforts to aid troubled banks revive the market's appetite for more risky assets.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Ben Rooney, staff writer

Click the chart for current ForEx rates.

NEW YORK ( -- The U.S. dollar fell against the euro and the pound Friday as the government stepped up its efforts to aid troubled banks and boost the ailing economy.

The euro rose 1.4% to $1.3294 from $1.3154 late Thursday in New York, while Britain's pound bought $1.4742, up from $1.4663.

Against the yen, the dollar declined 1% to ¥90.57. But the Japanese currency fell more than 2.2% against the euro to trade at ¥120.47.

"Government backstops, stimulus packages and presidential inauguration optimism is helping offset the gloom emerging from the raw data," said Ashraf Laidi,chief market strategist at CMC Markets, in a research note.

Many investors view the dollar as a safe alternative to more economically sensitive assets such as stocks or high yielding currencies. As a result, the greenback often falls when investors are more optimistic about the economy and therefore more willing to take risks.

The traditionally high-yielding euro and pound had been under pressure in previous sessions as turmoil in the banking sector undermined investors' appetite for risk. But the sentiment changed Friday as the government expanded its efforts to aid struggling banks.

"Risk appetite remains propped by another U.S. government back stop to a U.S. bank, this time to Bank of America's efforts in absorbing Merrill Lynch," Laidi said.

The U.S. Treasury will extend $20 billion more to Bank of America (BAC, Fortune 500) to help it absorb losses associated with its purchase of ailing brokerage Merrill Lynch. It will also guarantee $118 billion of assets at the bank.

Meanwhile, Senate lawmakers on Thursday effectively approved President-elect Barack Obama's request to access the second half of $700 billion Troubled Asset Relief Program.

Also on Thursday, House Democrats released an expansive economic recovery plan, saying it is central to stemming what has become the worst economic crisis in decades.

The plan - the American Recovery and Reinvestment bill - calls for $550 billion in spending and aid to states and $275 billion in tax cuts.

Friday's advance comes amid a mixed bag of economic reports.

The Labor Department's Consumer Price Index, a measure of inflation, declined a seasonally adjusted 0.7% in December from the prior month. It was the third consecutive decline and was led by a sharp drop in energy prices.

On an annual basis, CPI edged up 0.1% in 2008, the weakest annual increase since 1954.

Striping out volatile food and energy costs, however, the index was unchanged.

A separate report showed that consumer confidence unexpectedly increased in January.

The Reuters/University of Michigan index of consumer confidence rose to 61.9 in January from December's 60.1. While the reading was above economists' forecast of 59, the index remains at historically low levels.

Meanwhile, figures from the U.S. Federal Reserve showed that industrial production dropped by a bigger-than-expected 2% in December.

Industrial production was down 7.8% versus December 2007, the biggest drop since September 1975, as the global recession weighs on the manufacturing sector.  To top of page

Track 17 major currencies

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.