Speculations that President Barack Obama’s plan will help prevent the flood of foreclosures and stabilize the economy have given the U.S. dollar reasons to overtake euro and yen.
While in Mesa, Arizona for his road trip across western states, Obama unveiled a 75 billion program to help alleviate the foreclosure crisis and revive the housing market.
Speculations that Obama’s foreclosure abatement plan will help in the recovery of the American economy brought a change in the three-day upward movement of the yen. The Japanese currency dropped against the euro, Australian and American dollar.
The American dollar gained 1.4 percent over yen’s 93.75 rate and 0.3 percent against euro’s $1.2545.
Furthermore, the Dollar Index , which monitors the movement of the American currency against yen, pound, euro, krona, Canadian dollar and Swiss franc, has reached 88.254, its highest since November 21, 2008 when it peaked at 88.463. For 2008, the Dollar Index gained almost 8 percent.
The strong performance of the American dollar against other currencies is attributed to Obama’s foreclosure prevention program which is expected to help nearly 5 million borrowers on the brink of losing their properties to foreclosures.
The program hopes to refinance loans undertaken by Federal Home Loan Mortgage Corp. and Federal National Mortgage Association.
Stephen Gallo, Schneider Foreign Exchange’s market analysis head, said that the plan to stall foreclosure will attract Japanese investors to purchase securities issued by both government-sponsored enterprises.
On its part, the Department of Treasury will purchase about $200 billion preferred stocks from housing companies to help trim the number of foreclosed homes by stabilizing the housing market.
Meanwhile, California Public Employees’ Retirement System money manager Eric Busay noted that the U.S. exerted more effort to address the growing foreclosure problem than other countries. This plays well with the dollar which gained strength over other currencies.
Standard Chartered PLC predicted that the American dollar will increase by 7 percent over the Japanese currency in the coming quarter should it soar above 94.63 yen as a result of the Obama Administration’s efforts to bring down the number of repossessed homes.
On the other hand, Federal Reserve officials have lowered their economic forecast for 2009, with majority of them expecting that the economy will shrank by as much as 1.3 percent. The economy posted a decline of 3.8 percent in the last quarter of 2008.
Author Resource:-
John Cutts has been educated in the finer points of the foreclosures market over 5 years. Learn how to invest in foreclosures at ForeclosureHomesInvesting.com.
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