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US dollar tumbles as bailout plan stokes deficit concern
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| Contributor | Servo |
| Last Edited | Servo Sep 22, 2008 03:22pm |
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| Category | News |
| Media | News Service - Reuters |
| News Date | Monday, September 22, 2008 09:00:00 PM UTC0:0 |
| Description | The U.S. dollar tumbled, hitting multiweek lows against the euro and against sterling on Monday as the U.S. government's bailout plan to ease a financial credit crisis reignited worries about the country's massive budget deficit.
The $700 billion package, which is awaiting congressional approval, would give sweeping powers to the U.S. Treasury to buy mortgage-related bad debts from financial firms, including U.S. subsidiaries of foreign banks.
But analysts say foreign investors will be increasingly reluctant to finance the growing U.S. deficit at the current dollar exchange rate and that funding the gap would require higher interest rates and a weaker currency.
"Nobody knows what form the bailout package will take. We only know vaguely how much it will cost," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. The U.S. fiscal position "does not look pretty for this year and next ... Overall, the uncertainty is driving the current flight out of the dollar," he added. |
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