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FINANCIAL MARKETS : Fed Again Aids Dollar, Giving Stocks a Break

November 04, 1994|From Times Wire Services

The dollar rose broadly Thursday after the Federal Reserve System intervened in the foreign exchange market for a second straight day by buying the U.S. currency, giving stocks a break from a three-day selloff.

But the dollar finished below its highs for the day as a sluggish bond market and uncertainty about the size and timing of a widely expected interest rate increase discouraged would-be buyers.

The Federal Reserve Bank of New York stepped into the currency market at least three times after 11 a.m., purchasing an estimated $800 million, traders and analysts said. On Wednesday, the central bank bought between $1 billion and $1.25 billion in an aggressive support action after the currency fell to a record low against the Japanese yen.

Neither the Fed nor the Treasury Department, which directs interventions, normally comment on such actions.

In New York trading, the dollar closed at 97.71 yen, up from 97.60 on Wednesday. The greenback also closed at 1.5185 German marks, up from 1.5138.

Despite support from the American central bank, analysts said the dollar could resume its downward grind next week unless sustained rallies in U.S. securities markets help stimulate demand for the currency.

"The Fed was in again today, but we're closing below the intervention levels," said Win Thin, international economist at MCM Currencywatch Inc. "Not that many people are saying, 'I should be buying dollars.' If foreign investors decided they want to hold U.S. assets, the dollar would be higher."

Stocks endured a volatile session with minor gains, but fears about higher interest rates overshadowed enthusiasm about a recovering dollar.

Reversing a three-day losing streak that sent the blue-chip indicator down nearly 94 points, the Dow Jones industrial average closed 8.75 points higher at 3,845.88. In the broader market, rising issues edged out decliners by a narrow margin on the New York Stock Exchange. Big Board volume totaled 286.67 million shares, down from 333.24 million Wednesday.

Technology stocks made a strong showing for the third consecutive session, boosting broad-market indexes.

The NYSE's composite index rose 0.68 point to 456.66. The Standard & Poor's 500-stock index climbed 1.40 points to 467.91. The Nasdaq composite index rose 0.28 point to 772.10.

Bond market participants were more concerned about the threat of higher interest rates. They sent bond yields slightly higher, putting the brakes on stock market gains.

By day's end, the yield on the bellwether 30-year bond edged up to 8.10% from Wednesday's 8.09%. Its price, which moves in the opposite direction, dropped 3/32 point, or 94 cents per $1,000 in face amount.

Ordinarily, bond prices would tend to rise in tandem with an increase in the dollar's value, since a stronger dollar might spur foreign investors to purchase more dollar-denominated instruments.

Among the market highlights:

* Auto stocks moved higher on generally strong October car and truck sales figures. General Motors was the most active issue on the NYSE, rising 7/8 to 39 1/8. Ford rose 1/2 to 29 5/8. Chrysler added 1/2 to 48.

* Stocks of some retailers were big gainers on strong October sales.

Dayton Hudson leaped 4 3/8 to 81 7/8, Limited rose 1 3/4 to 20 3/4, Gap added 2 5/8 to 36 1/4 and Dillard Department Stores gained 2 to 28 5/8.

* Kemper lost 2 to 48 1/2 after Conseco on Wednesday proposed reducing its merger offer with Kemper to a total of $60 a share in cash and stock from an earlier $67 offer. Conseco was up 1 3/8 at 38 7/8.

* Software company Midisoft tumbled 3 to 13 following a downgrading by Dain Bosworth.

Overseas markets closed mostly higher.

London's Financial Times 100-share average closed up 23.1 points at 3,104.4, and Frankfurt's DAX average closed at 2,2,051.48, up 9.13 points. The Tokyo stock market was closed for a national holiday. Mexico City's Bolsa index fell 9.01 points to 2,543.07.

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