Gas Week

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US dollar drops below Canadian dollar; low-value dollar makes long term Treasury bonds less attractive

Posted by gasweek on 5 October, 2007

The US dollar dropped below the Canadian dollar last week and was barely hanging on to parity now, reported David Cho in The Sydney Morning Herald (27/9/2007, p. 27).

Mortgage holders face greater pressure: The dollar’s slide was affecting every corner of American life, from corporate earnings to vacation plans. But, more disturbingly, it also has the potential to punish the very mortgage holders that the Federal Reserve intended to help with its aggressive interest rate cut last week. That is because a low-value dollar makes long-term Treasury bonds less attractive and new data from the Treasury Department indicate that China and other big investors in these bonds are beginning to sell their holdings. That helped send the 10-year Treasury price down and its interest rate up in the last week. Mortgages – particularly jumbo and adjustable-rate loans – are tied to this rate.

The Sydney Morning Herald, 27/9/2007, p. 27

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