Dollar Rises as U.S. Lawmakers to Vote on Bank Rescue Package

By Stanley White

Sept. 29 (Bloomberg) -- The dollar rose to a one-week high against the euro as U.S. lawmakers reached a breakthrough on a $700 billion package to revive credit markets by purchasing distressed debt from banks.

The U.S. currency also gained against the yen as the House may vote on the plan today, according to Speaker Nancy Pelosi. The British pound dropped to a one-week low as Bradford & Bingley Plc, Britain's biggest lender to landlords, may be taken over by another bank or nationalized today under a U.K. government-backed plan to protect 21 billion pounds ($39 billion) of customer deposits.

``The dollar is set up for a relief rally,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The U.S. rescue package is on its way to becoming law. That goes a long way to help improve sentiment for the U.S. financial sector and the dollar.''

The currency rose to $1.4533 per euro at 7:43 a.m. in Tokyo from $1.4614 late in New York on Sept. 26. It earlier reached $1.4513, the highest since Sept. 22. It rose to 106.36 yen from 106.01 yen at the end of last week. Against the pound, the dollar gained to $1.8266, the strongest in a week, and traded at $1.8299 from $1.8445. The U.S. currency may rise to 106.80 yen today, Ishikawa forecast.

The plan would let the Treasury begin buying distressed debt securities from financial companies affected by the record number of home foreclosures.

The breakthrough in negotiations between Republicans and Democrats came during a weekend of talks aimed at reaching agreement before global financial markets reopen today. The package will give Treasury Secretary Henry Paulson an immediate $250 billion to buy bad loans, with the rest to be doled out in stages.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net