FOREX-Dollar holds gains after Bernanke's soothing message

Wed Jul 9, 2008 2:28am BST
 
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* Prospect of more Fed aid to Wall St firms lifts dollar

* Oil retreat helps soothe economy concerns

* U.S. oil inventory data key for oil, dollar

By Eric Burroughs

TOKYO, July 9 (Reuters) - The dollar was steady on Wednesday after rebounding the previous day when Federal Reserve Chairman Ben Bernanke said the central bank may extend its direct lending to Wall Street investment banks, soothing some worries about the financial system's health.

Bernanke said the Fed was watching financial markets closely and may keep open the emergency lending facility for big Wall Street firms, which was launched after the collapse of Bear Stearns, longer than initially planned. [ID:nN08304308]

Those remarks helped relieve investors who were rattled on Monday by a report that the top U.S. mortgage lenders, Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research), could have to raise a combined $75 billion of capital due to upcoming accounting rule changes.

The regulator of Fannie Mae and Freddie Mac later said that the expected change in rules should not affect their capital position. [ID:nN08371498]

The dollar also got a boost from a retreat in oil prices from last week's record of $145.68 that also provided a welcome relief to investors worried about the corrosive impact of steep energy costs on already weakening corporate profits and global growth.  Continued...

 
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