Hedge funds on the brink as US Federal Reserve cash fails to ease crisis

[...]
The funds’ predicament – seven funds have been frozen this month – was seen as evidence that the initiative by America’s central bank to allow lenders to swap their risky mortgage-backed bonds for safer Treasury debt, will be of help only in the short term. Those fears hit the dollar and New York equity markets, with the greenback falling to a new low against the euro and sterling, as the European currency hit $1.55 for the first time.

The Dow Jones industrial average, after a rally of more than 400 points on Tuesday, ran out of steam as dealers worried that the Fed’s lending package would not reverse Wall Street’s liquidity crisis. At the close, the Dow was off 46.61 at 12,110.02.

Drake Management, a New York money manager, wrote yesterday to investors in its $3 billion Global Opportunities Fund, warning them that it was considering closing the fund. The fund, which lost 25 per cent last year, has already blocked investors from withdrawing their cash.

[...]