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Mixed Session for Dollar

The greenback drops against the euro, but rises vs. the yen.

The greenback was mixed early Friday as traders digested new government economic data, along with remarks from

Federal Reserve

Chairman Ben Bernanke and President Bush on the mortgage sector and financial markets.

Euros were trading for $1.3688, up from $1.3621 late Thursday. The pound was trading at $2.018, up slightly from $2.0116 a day earlier. Dollars rose to 116.23 yen from 115.8.

Before the market opened, the Commerce Department reported stronger-than-expected personal income and spending figures, as well as lower-than-forecast inflation figures.

That was quickly followed by a commitment from Bernanke that the Fed would "act as needed" to calm the turmoil in the credit markets and mitigate further fallout from the worsening housing sector.

In addition, President Bush said he would have the Federal Housing Administration stand behind late home loans and give borrowers more opportunity to avoid losing their houses. At the same time, he said the government wouldn't "bail out" speculators or people who bought more home than they could reasonably afford.

"I think the big story here is that the Fed cut in the discount rate

earlier in August has succeeded in stemming the liquidity crisis," says Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York City.

The real test will come after Labor Day when credit market participants return from vacation. At that point, Woolfolk sees more bad news hitting the tape.

If the credit markets react to the malaise by drying up again, as they did earlier this month, he expects the Fed to cut interest rates and so pave the way for further declines in the dollar.

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The exchange-traded funds that track the various currencies moved in line with action in the forex market. The

CurrencyShares Euro Trust

(FXE) - Get Invesco CurrencyShares Euro Trust Report

and the

CurrencyShares British Pound Sterling Trust

(FXB) - Get Invesco CurrencyShares British Pound Sterling Trust Report

were both up slightly.


CurrencyShares Japanese Yen Trust

(FXY) - Get Invesco Currencyshares Japanese Yen Trust Report

was lower by 0.4%.