The US dollar rose against most major currencies on Wednesday after US Treasury Secretary Henry Paulson said the government wouldn't buy troubled assets from banks.

Paulson said the US$700 billion financial bailout plan would not be used to buy bad mortgage assets as originally planned. The government currently doesn't think purchasing such assets is the most effective way to use bailout funds, he said.

The administration will continue to use US$250 billion of the program to purchase stocks in banks, while looking at a major expansion into other markets providing support for credit card debt, auto loans and student loans.

"Approximately 40 percent of US consumer credit is provided through securitization of credit card receivables, auto loans and student loans and similar products," Paulson said, "This market, which is vital for lending and growth, has for all practical purposes ground to a halt."

Paulson's comments added to investors' worries over the falling financial industry, sending stocks and high-yielding currencies sharply lower.

Risk appetite in foreign exchange trading was also hurt by bad corporate news.

Major retailer Macy's reported big loss in the third quarter. Morgan Stanley outlined plans to cut 10 percent of staff in its institutional securities group. Consumer electronics retailer BestBuy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.

The Bank of England said Wednesday it expects inflation to fall to the government's target of 2 percent next year, but warned that inflation would then continue falling to below that level as the economy contracts further.

"We are certainly prepared to cut Bank rate again if that proves to be necessary," Bank of England Governor Mervyn King said.

Some analysts expected the Bank of England would cut rate by at least 50 basis points in December. The pound fell to its lowest level in six years against the dollar in Wednesday New York trading.

The euro bought US$1.2512 in late New York trading compared with US$1.2531 it bought late Tuesday. The pound fell to US$1.4966 from US$1.5401.

The dollar was unchanged at 1.1866 Swiss francs. It fell to 95.52 Japanese yen from 97.68 Japanese yen. It rose to 1.2368 Canadian dollars from 1.2030 Canadian dollars.

(Xinhua News Agency November 13, 2008)