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Trade Deficit Pushes Dollar Sharply Lower

December 10, 1987|Associated Press

LONDON — News of an unexpectedly wide U.S. merchandise trade deficit in October pushed the dollar down sharply to a record low against the Japanese yen in hectic European trading Thursday.

Gold prices rose.

The U.S. Federal Reserve, the West German Bundesbank and other European central banks reportedly intervened to buy dollars to help slow the pace of the dollar's fall, but the moves didn't give the dollar much lasting support.

The Bundesbank, in an unusual move, confirmed that it intervened, as did the Bank of Italy. The Italian central bank, departing from normal practice, said the intervention was made in concert with the Fed.

The dollar plunged when the Commerce Department reported that the U.S. October trade deficit widened to a record $17.6 billion from $14.08 billion in September. Dealers said they had been expecting a trade gap of about $14.5 billion.

"The trade figures took the market by surprise," said one dealer, who wasn't identified in accordance with British practice. "It is difficult to see any major recovery from these levels for the time being."

The bearish news deepened fears that the dollar's nearly 2-year-old decline hasn't been steep enough to reverse the dismal U.S. trade performance, dealers said.

The dollar fell to 129.40 yen in London, its lowest trading level against the yen since modern exchange rates were established in the late 1940s.

In Tokyo, where trading ends before Europe's business day begins, the dollar fell to a record closing low of 132.18 yen from Wednesday's record closing low of 132.35.

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