FRANKFURT, Germany (AP) _ The dollar rose against the euro and the British pound Monday, following Washington's announced bailout of mortgage giants Fannie Mae and Freddie Mac - a move that should help bolster a shaky U.S. housing market and seemed to renew global investor confidence.
The 15-nation euro bought $1.4200 in European afternoon trading, compared with $1.4243 in late New York on Friday. The euro has not traded below $1.4200 since last October.
The U.S. Treasury's decision Sunday to place Fannie and Freddie, which own or guarantee about half of U.S. mortgage debt, into a conservatorship removes a big cloud that had been weighing on global markets. However, it will probably end up costing U.S. taxpayers billions of dollars.
Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price from consumers by driving up the cost of home loans and all other types of borrowing because the failures would have created massive turmoil in financial markets around the world.
"This has helped prop up the dollar," said Howard Archer, the chief European economist with Global Insight in London.
Archer said the move was positive and more or less expected in some form and that he thought it should continue to lend support to the dollar and markets. It is, however, not the end-all to problems plaguing world markets, he said.
"Obviously it brings a bit of confidence and reduces uncertainties and it's a welcome move; it helps matters but there are other significant problems," he said.
European inflation, weak consumer confidence, low investment, falling employment, and tight credit were all stoking fears of recession - both on the island and the continent - which could benefit the dollar further, Archer said.
European and Asian equity markets cheered the news before New York's open Monday.
Germany's blue chip DAX 30 was up 3.5 percent Monday afternoon, while the London Stock Exchange was 4 percent higher. Meanwhile Japan's benchmark Nikkei index surged 3.6 percent higher and Seoul's Kospi rose 5.2 percent. Hong Kong's Hang Seng index advanced 4.3 percent.
"The plan should help restore recently flagging confidence in the U.S. growth outlook for the financial system at another crucial juncture - ahead of feared quarterly results from major banks," said Marco Annunziata, UniCredit's chief economist in London.
"The dollar should benefit, and some risk appetite should be restored, to the detriment of yen and Swiss franc. It should also help shore up sentiment on emerging markets, which has been badly hit in recent days," he said.
In other currencies, the British pound fell to $1.7615 from $1.7690 in New York on Friday, just above its low of more than two years at $1.7534 set last week. The dollar bought 108.74 Japanese yen Monday afternoon, up from 107.72 yen late Friday in New York.