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Dollar Plummets to World Lows; White House Wary : European Actions Fail to Stem Tide

December 28, 1987|Associated Press

As the dollar plunged around the world today, the Reagan Administration said that it wants to see stability in the U.S. currency and that a further decline would be counterproductive.

"The United States wants to see stability in the dollar," White House spokesman Marlin Fitzwater said. "We feel strongly that any further decline or excessive fluctuation could be counterproductive."

The dollar fell to new lows against the Japanese yen, West German mark, the Swiss franc and the Dutch guilder. It also hit five- to six-year lows against the British pound, French franc and Italian lire.

To slow the dollar's fall, the West German Bundesbank bought about $200 million over the course of the day, while other European central banks bought a similar amount, dealers said.

Late in the afternoon, the New York Federal Reserve also entered the markets, but the collective interventions did little to stem the currency's decline, traders said.

Fitzwater made his statement in Los Angeles as President Reagan began a weeklong California vacation.

Dow Jones Slumps

The spokesman refused to comment on the post-Christmas drop on the New York Stock Exchange, where the Dow Jones average of 30 industrials slumped 56.70 points today.

Asked if the recent exchange-rate stability agreement among the United States and its major economic allies has had any effect, Fitzwater said, "I won't make any judgments about it. . . . This is our position."

His statement was similar to one issued last Tuesday by the Group of Seven industrial democracies--the United States, Japan, West Germany, Britain, France, Italy and Canada--that the dollar had fallen enough.

In that statement, the group declared that "a further decline of the dollar . . . could be counterproductive by damaging growth prospects in the world economy."

Fitzwater said the United States is in consultation with its major economic partners "on a daily basis" but he would not comment on whether the group's statement specifically had been discussed.

At another point, he said, "I think it's fair to say that all of our statements and actions are coordinated to a degree. . . . But I can't be specific about how formal that process is."

Hedges on Intervention

Asked whether the United States is prepared to intervene to break the dollar's fall, he said, "There are any number of consultations that go on continually in the financial world but we don't discuss specific actions."

He declined to say to what the Administration attributed the decline of the stock market and the dollar. "We don't do psychoanalysis," he said.

Asked if the United States has determined that a "floor" had been reached in the fall of the dollar, he said, "I wouldn't try to interpret that" and said he'd stick with the language of his statement.

The spokesman said Reagan has not spoken recently with Federal Reserve Chairman Alan Greenspan, but had met with him at the White House last week for a "general discussion" on the economy.

Last week's statement by the so-called "G-7" nations was widely viewed as a signal that central banks, including the Federal Reserve, would intervene in currency markets to keep the dollar from dipping further. Intervention is the direct buying and selling of a currency by a central bank.

However, despite such apparent recent intervention, the dollar has continued to slide in recent days. Overall, the dollar is now worth only about half of its 1985 value against the West German mark and the Japanese yen.

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