The dollar was doing well until Tuesday, September 9, 2008 when it fell. In addition to the dollar falling, shares of Lehman Brothers, the investment banking firm, also dropped as investors worried that the company would not be able to raise capital and shifting the spotlight back on the fragile American economy. This was the lowest the shares have dropped in close to ten years and it managed to sap the excitement the financial community was enjoying from the Freddie Mac and Fannie Mae bailout.

The decline in shares and the bailout have caused investors to dump risky stocks and trade in the American dollar to go with ‘safe’ items, such as the Japanese yen and Swiss franc. Gareth Sylvester, a currency strategist at HiFX in San Francisco states, “There are some rumors in the market place regarding the well-being of Lehman Brothers. Whenever we see heightened uncertainty with any large institution, risk aversion moves higher and traders just want to get out of riskier asset classes. We are seeing people getting out of risky trades and into some safer currencies.”

Lehman is the fourth largest investment bank in the United States that there is legitimate concern that it could be facing the same fate as Bear Stearns who was taken over by the Treasure and Federal Reserve in March 2008. Lehman Brothers refused to comment on their falling stocks. Analysts have already noticed that the focus of the financial world has shifted back to the impact of the bailout on the nation’s economy and budget deficit.

Says Dustin Reid, an ABN Amro Bank foreign exchange strategist in Chicago, “I am not surprised to see dollar/yen lower on slightly more risk adverse markets. The market is probably taking back a little bit of the euphoria that we initially had and was dollar positive, given the taxpayer implication and the impact of the debts.”

A drop in the price of oil and crude trading in addition to a drop in exchange rates with ICE Futures has not helped the state of the American dollar. Analysts have also identified additional things that have caused the dollar to decline. According to Ronald Simpson, the head of global currency analysis at Action Economics out of Tampa, Florida, “Given the dollar gains we have seen, it’s just time for some profit-taking. We have seen some cutting back on long dollar positions,” said Ronald Simpson. The jury is still out a little bit with regard to the bailout of Freddie and Fannie. For the most part, the markets are taking it as a positive, but the dollar cannot rise in a straight line. The uptrend is still intact.