Obama Announces Foreclosure Program, Sending USD/JPY to 6 Week High

Last updated 2/18/2009 9:34 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

The US dollar soared to a 6 week high against the Japanese Yen after President Obama announced a $75 billion foreclosure prevention program. This breaking news came less than an hour after housing market data hit record lows . The rally in USD/JPY represents the market's optimism about the US' initiatives to stabilize the economy while the backward looking housing market data is only confirming the obvious. The total value of the program is larger than earlier estimates and will help up to 9 million Americans refinance mortgages and avoid foreclosure. Struggling homeowners will receive lower interest rates, which will help to reduce their monthly mortgage payments and keep their homes.

Focusing on the housing market is a critical step to stabilizing the US economy. It provides direct relief for consumers and will help to accelerate a recovery. The US will be using Fannie and Freddie to help with the loan refinancing and to do so, they have boosted Fannie and Freddie's stock purchases to up to $200B and their mortgage portfolios to $900B. These funds will come out of the Financial Stability Plan.

With trouble brewing in Europe, the new programs announced by the Obama Administration should keep the US dollar attractive to investors over the medium term.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.