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CURRENCY : Dollar Falls to Record Lows; Gold Advances

December 18, 1987|From Reuters

NEW YORK — The dollar fell to record lows Thursday, pushed down by a view that Washington will do little to stop its fall and remarks by a former White House economic adviser predicting continued declines ahead.

The dollar closed at 1.6175 West German marks after hitting a record low quote of 1.6155 marks just before the close. The dollar is at its lowest since the West German currency was created in 1948. The dollar closed Wednesday at 1.6285 marks.

At Republic National Bank of New York, gold bullion was bid at $485.25 an ounce at 4 p.m. EST, up from $484.60 late Wednesday.

In early Asian trading Friday after the New York close, the dollar fell even further, hitting 1.6140 marks.

Against the Japanese yen, the dollar fell to a record low quote of 125.75, its lowest since the yen was realigned following World War II. It recovered slightly at the close at 125.85, down from 127.05 yen on Wednesday. It then moved even lower in Asian activity, hitting a new low of 125.50 yen.

With trading thin in Europe and North America ahead of the holidays, Tokyo's activity had greater impact, dealers said.

"This is the time of year when the Japanese have the chance push the dollar as far as they like. And they're selling it as if it's going out of fashion," one dealer said.

Predicts Further Fall

The dollar, which has been hit by gloom over the unyielding U.S. trade deficit, will have to fall much further before trade balances improve, said Martin Feldstein, the former chairman of the President's Council of Economic Advisers and now a Harvard University professor.

"I think that the dollar must reach a rate of 100 yen within three or four years for long-term current account equilibrium," Feldstein told the Japan Society in New York, in remarks that helped push the dollar lower.

Dealers remained dubious that the Reagan Administration would take concrete steps to halt the dollar's slide. Also, comments Wednesday by European and Japanese officials suggested that other nations were not alarmed by the dollar's fall. The Bank of Japan was reported to have bought dollars Thursday, but not aggressively.

"There's just no major incentive to buy dollars," said Carol Callanan of Credit Lyonnais. "You have to go along with the bearish trend."

"The Far East has been selling all week," said Leslie Puth of Banque Indosuez. Dealers said the U.S. currency remains particularly vulnerable against the yen, given Japan's strong domestic growth.

News that the U.S. real gross national product for the third quarter was revised upward to 4.3% from a 4.1% annual rate failed to spur much dollar-buying interest.

Although the revision was slightly more than expected, it did little to dispel the gloom overhanging the dollar. "The sentiment is totally bearish," said Francoise Soares-Kemp of Credit Suisse.

The British pound was pushed higher by the weak dollar, closing at $1.8400 from $1.8350 on Wednesday. The gains came despite a sharp fall in oil prices. Britain is a major oil exporter.

Tables, Page 8

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