fundamental alert

Forex Traders Buy US Dollar as Rescue Plan is Revealed

Sunday, 28 September 2008 20:25:10 GMT  |  Ilya Spivak, Currency Analyst

The US dollar rallied sharply as lawmakers finally released the details of the compromise $700-billion government rescue plan to shore up ailing financial markets. EURUSD gapped 64 pips lower from last week’s close at 1.4610 to open at 1.4546 and raced lower toward the 1.45 level.

As originally proposed, the plan would allow the US Treasury to purchase troubled debt from financial institutions. The Treasury will also have the option to provide insurance for ailing firms rather than buy assets outright. The government would be given non-voting shares in the companies they help to assure that taxpayers make money when they regain value. The deal also requires limits on executive pay as well as breaks up the total $700 billion sum into several payments: the Treasury would get $250 billion right away, another $100 billion subject to presidential approval, and the final $350 billion subject to a Congressional certification of approval. A loophole is built in whereby if Congress does not approve the last portion, the president could veto that decision. In that case, Congress would require a greater-than-usual majority to override the veto. The first round of voting on the measure are said to begin tomorrow.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars