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Experts mull over why and how the dollar rises

16 September 2008 13:40 (UTC +04:00)

Baku. Vahab Rzayev - APA-Economics. The US dollar appreciation on world markets is quite far from economic logic.
Along with this and US market indices also go up.
Some experts argue that the dollar rises against the backdrop of the declining euro.
But it is clear that this is not linked to macroeconomic and financial indicators in Europe.
All analysts recognize that this process is not linked to financial factors.
In fact, the main reason for increasing U.S. indexes associated with the proliferation of information on 7 September the Ministry of Finance of that country. This information was associated with the transition to governance companies Fannie Mae and Freddie Mac, with the bulk of participation in the U.S. mortgage market. These companies have a mortgage obligations amounting to 5 trillion. dollars. This event was the impetus for investors in the world and eventually led to an increase in the stock market. According to experts, mortgage companies in the transition government will raise the cause of inflation in the U.S.. This is only the beginning of the U.S. economy recovery. In such a case, that is, if there is a weak economy and the actual causes of unstable conditions strengthening dollar remains unknown.
Note that this process was influenced by the markets and Russia. There are major indexes falling and the ruble.
The Federal Housing Finance Agency (FHFA on September 7, 2008 announced the decision to place two Government sponsored enterprises (GSEs) Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) into conservatorship run by FHFA.
The federal takeover of Fannie Mae and Freddie Mac is one event in a continuing series of unexpected financial restructurings in the 2008 credit crisis among major and minor United States financial firms. Leading factors in the crisis are losses, impairment of capital, and loss of market confidence related to the subprime mortgage crisis.
The combined GSE losses of $14.9 billion and market concerns about their ability to raise capital and debt threatened to disrupt the U.S. housing financial market. The Treasury committed to invest as much as $200 billion in preferred stock and extend credit through 2009 to keep the GSEs solvent and operating. The two GSEs have outstanding more than US$ 5 trillion in mortgage backed securities (MBS) and debt; the debt portion alone is $1.6 trillion. The conservatorship action has been described as "one of the most sweeping government interventions in private financial markets in decades," and one that "could turn into the biggest and costliest government bailout ever of private companies".
Experts say the Federal takeover of GSEs will lead to inflation in the US which is the beginning of the US economy rehabilitation.
In this case, that is together with not strong economy and unstable trends, it is unknown how the dollar is rising. This also had influence on Russian market and pulled ruble down.