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US dollar to keep weakening

22 September 2008 14:07 (UTC +04:00)

Treasury Secretary Henry Paulsonâ€™s plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nationâ€™s debt ceiling by 6.6 percent to $11.315 trillion. Officials may also provide $400 billion of guarantees for money-market funds.
The U.S. Congress hopes to pass the legislation as early as this week. It would give the U.S. Treasury Department the unprecedented authority to buy up hundreds of billions of dollars worth of toxic mortgages and other debt held by banks that operate in the United States.
It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion. This is the most large-scale intervention since 1937.
After the announcement, market indices went up while the dollar slid to a three-week low (euro was trading at $1.4479).
Adverse-effects of the move have begun to emerge. Such negative effects may be the dollar depreciation, decline in the yield on T-bills, raw material appreciation, expected rise in inflation etc.
True, the US government is aware of all the side predictions and expectations but financial rescue is the priority to the dollar depreciation when weighing up the advantages and disadvantages at present.
The dollar lost 1% on September 19, a day after the rescue plan announced.
In this view, it is predictable that the tendency of the dollar will decline against Azerbaijanâ€™s national currency (manat) too.