The dollar rose to a four-week high against the yen and advanced versus
the euro as a U.S. government rescue of Fannie Mae and Freddie Mac
moved closer to congressional passage and oil prices fell.
The currency also gained as signs of stability in the financial
industry fueled bets that the Federal Reserve will raise interest rates
in September. The yen touched a record low against the euro as reduced
currency and stock volatility encouraged investors to add to holdings
of higher-yielding assets funded in Japan.
``The government's backstop for Fannie and Freddie is containing
systemic risk,'' said Richard Franulovich, a senior currency strategist
at Westpac Banking Corp. in New York. ``It created a blue sky for the
financial markets and gave a boost to the dollar.''
Futures traded on the Chicago Board of Trade showed a 55 percent chance
the Fed will increase its 2 percent target rate for overnight lending
between banks by at least a quarter- percentage point by Sept. 16, up
from 49 percent odds yesterday. Policy makers next meet Aug. 5.
The euro extended its decline versus the dollar as a report showed
industrial orders in the euro region fell in May more than twice as
much as forecast. Orders dropped 3.5 percent from April, the European
Union statistics office in Luxembourg said today, compared with a 1.3
percent decline predicted by economists.
Crude oil for September delivery fell for a second day, declining 1.4
percent to $126.18 a barrel. It has dropped 15 percent from a record
$147.27 a barrel reached July 11. The euro-dollar exchange rate and oil
have moved in the same direction 90 percent of the time during the past
year, according to Bloomberg calculations based on the correlation of
their value changes.