* Dollar falls as credit worries persist
* Investors focus on Fannie and Freddie
* Bernanke, Paulson comments mildly dollar-positive
(Updates prices, adds comments, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, July 10 (Reuters) - The U.S. dollar fell against
a basket of currencies on Thursday, weighed down by renewed
credit worries after shares in major mortgage finance sources
Fannie Mae and Freddie Mac tumbled on capital concerns.
Stress in financial markets intensified after Fannie Mae
<FNM.N> and Freddie Mac <FRE.N> stocks plunged to their lowest
since 1991. The yield spread premium for the larger Fannie Mae
rose to its highest since before the Federal Reserve's bail-out
of U.S. investment bank Bear Stearns Cos in March.
"This is all Fannie and Freddie, renewed credit concerns
overall, and general risk aversion that we have been seeing for
the week," said Ron Simpson, director of currency strategy at
Action Economics in Tampa, Florida.
"We saw dollar/yen sold down to below 107. Everybody is
still nervous," he added.
In late morning trading, the dollar index, tracking the
greenback's performance against six major currencies, fell 0.1
percent to 72.511 <.DXY>.
The euro rose 0.2 percent to $1.5778 <EUR=>, touching a
one-week high at $1.5800, according to Reuters Dealing. The
dollar was slightly down at 1.0275 Swiss francs <CHF=>.
The Swiss franc also gained versus sterling, which traded
down 0.5 percent at 2.0307 francs <GBPCHF=>, and rose against
the yen to 104.11 <CHFJPY=>, up 0.4 percent from late on
Wednesday.
Against the yen, the dollar trimmed gains to 106.97 <JPY=>,
off session highs at 107.43.
Worries over Fannie Mae and Freddie Mac were heightened
after Bloomberg News quoted former St. Louis Federal Reserve
President William Poole as saying both shareholder-owned but
government-sponsored agencies are "insolvent."
FREDDIE MAC, BERNANKE, PAULSON COMMENTS
"Congress ought to recognize that these firms are
insolvent, that it is allowing these firms to continue to exist
as bastions of privilege, financed by the taxpayer," Poole was
quoted as saying in an interview held on Wednesday.
Freddie Mac, however, rejected speculation it may need to
raise more funds, saying on Thursday that the second largest
source of U.S. home funding has "absolutely" enough capital.
See [].
That helped stabilize the market a bit, along with comments
from both Fed Chairman Ben Bernanke and U.S. Treasury Secretary
Henry Paulson, who said monetary authorities are committed to
restoring the financial system.
For Bernanke's and Paulson's comments, see [].
"The U.S. dollar looks to have survived the latest test,
with euro/dollar failing at $1.5800," said a trader at
Forex.com in Bedminster, New Jersey.
"But upside potential remains while the pair is above
$1.5760 and below there, the short-term buyers will bail out.
Dollar/yen and other yen crosses also look resilient, which is
slightly nuts when you consider what's going on in financial
shares," he added.
Earlier, news of a decline in U.S. weekly jobless claims
gave the dollar a fleeting boost, although analysts say data
on continuing claims reflect the ongoing deterioration in labor
market conditions. For jobless claims data, see
[].
Crude oil prices stayed about less than $10 below a recent
record high despite inventories falling heavily and renewed
geopolitical tensions <CLc1>. That has generally supported the
dollar earlier in the session, although U.S. crude futures last
traded at $137.65 a barrel, up more than 1 percent on the day.
In other currencies, sterling struggled against the dollar
<GBP=> and euro <EURGBP> after the Bank of England held
interest rates steady at 5.0 percent on Thursday, but analysts
say rates will have to fall, making the pound less attractive.
Sterling last traded at $1.9765, down 0.3 percent on the
day, while the euro rose half a percent to 79.82 pence.
(Editing by James Dalgleish)
