Dollar mixed as Treasury says it will help autos

[December 13, 2008]  NEW YORK (AP) -- The dollar was mixed Friday after the Treasury Department announced it is prepared to funnel cash to the nation's Big Three automakers.

The 15-nation euro rose to $1.3371 in late New York trading from $1.3317 it bought late Thursday. The British pound slipped to $1.4969 from $1.4978, while the dollar weakened to 91.12 Japanese yen from 91.76 yen.

A bailout-weary Congress on Thursday killed a $14 billion package to aid struggling U.S. automakers after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.

The breakdown left the fate of the auto industry -- and the 3 million jobs it touches -- in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Stocks pulled off sharp losses Friday after the White House and the Treasury announced they were considering diverting money from the Wall Street rescue fund to stave off bankruptcy filings among the U.S. carmakers.

Meanwhile, Friday's economic reports underscored investors' growing fear of a severe and prolonged recession.

The Labor Department said wholesale prices sank in November for the fourth straight month, raising deflation fears. Businesses also slashed inventories in October by the largest amount in five years. The Commerce Department said businesses saw the biggest cut in inventories since August 2003.

The reductions came as business sales fell by 3.5 percent in October. That topped the previous record drop of 2.4 percent, which occurred in September.

"Today we've seen a flight from risk when news hit the markets that the Senate rejected the bailout plan, but the dollar then gave back a lot of gains as the day progressed," said David Gilmore of Foreign Exchange Analytics in Essex, Conn. "Investors were happy to return to riskier currencies and assets, even as U.S. economic data continued to pile up on the dreadful side of the equation."

In other trading, the dollar fell to 1.1767 Swiss francs from 1.1869 francs it bought Thursday, but rose to 1.2432 Canadian dollars from 1.2345.

[Associated Press; By ERIN CONROY]

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