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Dollar rises as US Senate approves rescue plan

Dollar rises as US Senate approves rescue plan
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First Published: Thu, Oct 02 2008. 09 18 AM IST
Updated: Thu, Oct 02 2008. 09 18 AM IST
AFP
Tokyo: The dollar edged up in Asian trade Thursday as markets breathed a sigh of relief after the US Senate passed a revised financial bailout plan, dealers said.
The dollar firmed to 106.15 yen in Tokyo morning trade from 105.73 in New York late Thursday. The euro slipped to$1.3962 from 1.4009 but gained to 148.21 yen from 148.11.
Markets were encouraged that the Senate passed the bill but were waiting for the vote by the House of Representatives, which rejected an earlier version on Monday, said Hachijuni Bank forex chief Masatsugu Miyata.
Currency markets gave a mild response as “the passage (in the Senate) was only to be expected,” he said, adding that the bill’s fate was now in the hands of the House, which is expected to vote by the end of the week.
The US Senate adopted a revised form of the original $700-billion bailout package that adds tax breaks and raises the ceiling for federal insurance for bank deposits from $100,000 to $250,000.
It retains most facets of the original plan to give Treasury Secretary Henry Paulson the power to buy tainted mortgage-related assets from troubled banks and includes restrictions on “golden parachute” payoffs for executives.
But fears of a deepening credit crunch continued to plague markets with the liquidity squeeze worsening in Europe, where several banks have had to be rescued by governments, dealers said.
“Without a sharp fall in bank funding costs, soon the credit crunch will get worse and provide a more substantial drag on global economic activity,” analysts at NAB Capital wrote in a note to clients.
“Fears of a rapid and significant global economic slowdown were not calmed by September readings on the health of manufacturing activity around the world,” they said.
A JPMorgan index measuring the health of the global manufacturing sector slid to 44.2 in September from 48.6 in August, suggesting the more difficult conditions since the September 11, 2001 terrorist attacks, dealers said.
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First Published: Thu, Oct 02 2008. 09 18 AM IST