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Dollar's Slide Continues Despite Central Banks' Efforts to Halt Its Fall

October 29, 1987|From Times Wire Services

NEW YORK — The dollar slumped today for the fourth straight day amid traders' skepticism that efforts by leading industrial nations to prop up the U.S. currency can do much to arrest its fall.

Gold bullion prices fell by as much as $6 an ounce, and silver prices also dropped heavily.

Traders said the dollar's decline resulted from a market conviction that the Reagan Administration is not firmly committed to the Louvre accord to stabilize exchange rates.

The February agreement among the United States, Japan, West Germany, France, Britain and Canada favored coordinated intervention in the open market to steady the dollar, which has lost about 50% of its value in the previous two years.

Dealers said the West German Bundesbank intervened heavily in support of the dollar Thursday, buying as much as $400 million.

Intervention by the Federal Reserve, the Swiss National Bank and the Bank of Japan also failed to hold up the dollar.

Despite the further intervention from central banks and a flurry of supportive comments by various Group of Seven officials, including U.S. Treasury Secretary James A. Baker III, the dollar found little respite from this week's slide.

The currency dropped to a seven-year low of 1.7265 West German marks in New York morning trading from Wednesday's 1.7380 New York close, and fell by half a yen to 137.90 from Wednesday's 138.45.

The Federal Reserve came into the market at mid-morning to buy dollars, dealers said, but its efforts nudged the currency up only fractionally.

Comments by Treasury Secretary Baker to Washington reporters that the U.S. firmly supports the agreement on world currencies reached last February in Paris further steadied the currency, but it was still well below Wednesday's close.

"The dollar looks like it's under attack," said a dealer at one U.S. bank.

Earlier in Europe, where trading begins several hours before the New York opening, the dollar briefly touched its lowest level against the Japanese yen since World War II.

In Tokyo, where Thursday's trading has already ended by the time New York trading begins, the Bank of Japan bought an estimated $800 million to $1 billion in an effort to slow the dollar's decline.

But a senior dealer at a U.S. bank in Tokyo commented: "The central bank, against its intention, simply overheated the selling passion of participants, who were dying to sell the dollar."

The U.S. currency still finished in Tokyo near to its 40-year low of 137.25 yen in Tokyo.

In addition to the Bank of Japan, the central banks of West Germany, Italy, Switzerland and the U.S. bought dollars Thursday, dealers said.

But even so, in Europe the dollar traded below Wednesday's seven-year low against the West German mark and Dutch guilder, five-year lows against the British pound, French franc and Italian lire and post-World War II lows against the Swiss franc.

In London, the British pound soared to $1.7220 from Wednesday's five-year high of $1.7105.

Other late dollar rates in Europe included: 1.7270 West German marks, down from 1.7500; 1.4242 Swiss francs, down from 1.4435; 5.8175 French francs, down from 5.8735; 1.9415 Dutch guilders, down from 1.9735; 1,264.00 Italian lire, down from 1,269.50, and 1.3173 Canadian dollars, down from 1.3183.

Gold prices dipped in Europe, with some dealers suggesting that central banks had sold bullion to finance their dollar purchases.

In London, the metal fell to a late bid of $470 an ounce from $476 bid late Wednesday.

In Zurich, it dropped to $473 bid from $478.50 bid late Wednesday. Earlier in Hong Kong, gold rose $5.79 to close at a bid $480.79.

Silver bullion prices dropped in London to a late bid of $7.125 an ounce.

Currency dealers in New York noted that the market was still reeling from European Commission President Jacques Delors' comment Wednesday that the U.S. was prepared to let the dollar fall to help redress the trade imbalance.

Although the U.S. Treasury denied Wednesday that this was Administration policy and European leaders disowned Delors' remarks Thursday, the words failed to convince those traders who believe that the G-7 has endorsed lower target ranges for the dollar.

Delors himself today retreated from his Wednesday statements.

Speaking Wednesday before the European Parliament in Strasbourg, Delors said the Reagan Administration is prepared to let the dollar fall to 1.60 West German marks, well below its lowest point of 1.70 marks since the 1940s.

But Delors said today the remarks were being "exaggerated" and were taken out of context.

He said an exchange rate of around 1.80 West German marks to the dollar is the "acceptable and tolerable" level for the U.S. currency.

Dealers said the view persists that the concerted central bank intervention is aimed at smoothing the dollar's decline rather than turning it around.

Bundesbank directorate member Claus Koehler admitted as much today.

He said that the central banks are not defending specific currency levels, but trying to create stable market conditions.

Meanwhile, Japanese officials were particularly outspoken. Bank of Japan governor Satoshi Sumita said the G-7 leading industrial nations will continue to intervene whenever necessary to stabilize exchange rates, and finance minister Kiichi Miyazawa said major nations are intervening heavily.

A MONTH OF VOLUME RECORDS The 10 busiest trading days on the New York Stock Exchange, with number of shares traded followed by date: 608.12 million, Oct. 20, 1987 604.33 million, Oct. 19, 1987 449.35 million, Oct. 21, 1987 392.16 million, Oct. 21, 1987 338.48 million, Oct. 16, 1987 308.82 million, Oct. 26, 1987 302.39 million, Jan. 23, 1987 279.41 million, Oct. 28, 1987 278.13 million, Aug. 11, 1987 266.54 million, April 14, 1987

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