By Nick Godt & William L. Watts, MarketWatch NEW YORK (MarketWatch) -- The dollar reversed course to trade sharply lower against most major rivals on Tuesday after the Federal Reserve unveiled a $200 billion plan to support the issuance of loans to consumers. The central bank announced what it called a term asset-backed securities loan facility, a plan under which it will lend up to $200 billion to support the issuance of debt backed by consumer and small-business debt -- such as credit-card loans, student debt, auto loans and loans backed by the Small Business Administration. See full story. "The Bush administration bailed out Citigroup yesterday and has now made a colossal announcement aimed at putting a bottom in the asset market," Kathy Lien, director of currency research at Global Forex Trading, wrote in a research note. The move, she said, will cause the Fed's balance sheet to balloon to $3 trillion. "For investors that have been concerned about the funding crisis, this is an even bigger reason to sell dollars," Lien wrote. The dollar index , which tracks the U.S. unit against a basket of six major currencies, stood at 84.871, compared with 86.198 in early trade and from 85.912 in late North American trade Monday. In U.S. economic news, the Commerce Department said the economy contracted at a 0.5% annual rate in the third quarter, worse than the negative 0.3% estimated a month ago. The revisions to gross domestic product were largely due to weaker consumer spending. See Economic Report. Separately, Standard & Poor's said home prices in 20 major U.S. cities dropped 1.8% in September from the previous month, and had fallen a record 17.4% from the previous year, according to S&P's Case-Shiller home price index. See Economic Report. The November consumer confidence index rose to 44.9 -- still a relatively low result -- from an upwardly revised October reading of 38.8. Economists surveyed by MarketWatch had expected a November reading of 39. In November 2007, the confidence index stood at 87.8. See Economic Report. Risk sets tone Earlier, the Japanese yen and the dollar had rebounded as worries about the impact of the global economic slowdown came back into focus. The move marked a reversal from Monday, when the two currencies tumbled as world equities soared in the wake of a massive U.S. government bailout of troubled lender Citigroup . "Risk aversion should stay elevated, given that global recession fears prevail," wrote strategists at Commerzbank in Frankfurt. "The list of potential trouble spots simply is too long for a long-lasting normalization," they said. At KBC Bank in Brussels, economists remained cautiously negative on the euro's prospects, but they noted the single currency has demonstrated increased resilience of late. Over the short term, "swings in global risk aversion will continue to set the tone" for trading in the euro against the dollar, they told clients. "So, the key question is whether global markets have entered calmer waters and whether [Monday's] stock market rally is more than a one-day correction," they wrote. "At least for now, there are no [technical] indications that something has changed in a fundamental way," they said.

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