Credit Concerns And Oil Rise Hurt The US Dollar

Credit concerns over Fannie and Freddie as well as rising oil prices have hurt the US dollar today. The Euro is trading 1.4870 as I write up from 1.4725 yesterday.

Federal Reserve Bank of Minneapolis Fed President Gary Stern, an FOMC voter, spoke Wednesday in an interview with Bloomberg. When asked about the health of Fannie Mae and Freddie Mac, Stern said that the Fed’s support for the GSEs is “fully appropriate” and that they cannot be allowed to fail. He implied that resolving the problems of institutions being too big to fail must be addressed in calm markets and the government must contain market spillovers. On monetary policy he suggested he is for no change in policy, saying now is a “good time to be patient” in setting the funds rate. He believes inflation will moderate in the coming months, and that while growth is likely to be “quite sluggish” in the coming quarters, the Fed has “largely addressed” potential downside risks to economic activity. He suggested the next move in the funds rate is likely to be a hike, saying the Fed will likely need to take back monetary accommodation before growth is strong.