The plan proposed by Henry Paulson the US Treasury Secretary may finally eliminate the 3 month period of USD growth.
According to the interest rate strategist at Barclays Capital – Michael Pond $700 billion intended for the bad mortgage assets and $400 billion intended to secure money- market mutual funds will surely increase US borrowing rapidly up to $1 trillion. But despite the fact that such aid will recover the confidence of investors to staggered financial markets the traders will still keep their attention to such factors as twin-budget, deficits of the current account and negative US interest rates.
Due to John Taylor chairman of International Forex Concepts in New York the largest hedge-fund company in the world the USD will fall, as the situation will develop.
After the plan of the Paulson was released the USD decreased rapidly in relation to Euro and several other major currencies. So this plan may finally result in ceasing the USD growth that began in June 2008 and increased it up 10% in relation to the Euro.
Thus the plan of the Paulson is nothing but the intrusion of the government into markets and the growth of the national debt maximum level to the point of $11.315 trillion.
According to David Woo a head of forex strategy at Barclays the fall of the USD will be the obstacle to the short-term profits that could have been gained from the banking crisis salvation.
After the Lehman Brothers filed for the bankruptcy last week Paulson and the head of the Federal Reserve Ben Bernanke started to think about some aid to recover the situation. So the government get the control over the American International Group and the Bank of America get the control over the Merrill Lynch.
Furthermore, Morgan Stanley decreased by 44% on September 17th and the Goldman Sachs lost 26% at the same day. And finally after the Lehman Brothers filed for bankruptcy the ICE future exchange’s Dollar Index decreased 1.2%.