The dollar rallied sharply on Tuesday, boosted by a steep drop in oil prices and comments from a Federal Reserve official suggesting that U.S. interest rates may have to rise even before financial markets recover.

An emergency rule to curb abusive short selling will likely be extended beyond 19 major financial firms as pressure mounts on the U.S. Securities and Exchange Commission to broaden the measure.

American Express posted second-quarter earnings well below forecasts and issued a dismal forecast, sending its stock down sharply in after-hours trading.

Treasury Secretary Henry Paulson, calling it critical that the markets have confidence in Fannie Mae and Freddie Mac, said he expects  congressional approval for a proposed rescue plan this week.

Richard Bove, a prominent U.S. banking analyst, was sued Monday by BankAtlantic Bancorp, which accused him of defamation and negligence over a recently published research report, the bank said.

Emergency action by U.S. regulators to rein in abusive short-selling in some large financial firms should be expanded to include the stocks of all public companies, a former top markets watchdog said on Monday.

Citigroup said on Monday that Vice Chairman Michael Klein would leave the largest U.S. bank by assets to pursue other opportunities.

A large U.S. union has urged Citigroup to break itself up, saying the bank had become "too big and unwieldy to properly oversee."

An emergency fundraising by HBOS, Britain's biggest home lender, flopped as investors took just 8.3 percent of the shares, leaving underwriters trying to sell almost 3.8 billion pounds ($7.57 billion) of stock.

The dollar slipped on Monday, losing some of its recent momentum, after better-than-expected earnings from Bank of America failed to convince investors that the worst for the U.S. financial sector is over.

Investors interested in buying and selling U.S. bank stocks based on the performance of the underlying businesses might well have gone on holiday this week  --  and might stay there next week.

Mortgage financier Freddie Mac took a step toward issuing common and preferred stock to help bolster its balance sheet Friday when the Securities and Exchange Commission accepted its registration statement filed earlier in the day.

Citigroup, the largest U.S. bank, posted a smaller-than-expected quarterly loss Friday despite $11.7 billion of write-downs and credit losses tied to deteriorating capital markets and the slumping economy.

Barclays' shareholders took up just 19 percent of new shares in the British bank's recently announced fundraising, meaning the bulk of the money will be provided by mostly new "anchor" investors led by Qatar.