Dollar Weakens Against Yen, Strengthens Against Mark and Pound
NEW YORK (AP) _ The dollar failed to regain much lost ground Wednesday despite a relatively stable day on Wall Street, rising a bit in Europe but eroding further against the yen on talk of higher interest rates in Japan.
Many foreign exchange traders were reluctant to buy or sell the dollar until they could get a further feel for the prognosis of the U.S. stock market.
Stocks strengthened Wednesday in what appeared to be a return to stability from the panicky selling that has gripped the market for the past several days. But the improvement didn’t rejuvenate demand for the dollar.
The dollar fell sharply Tuesday in a day of wild price swings in the stock market.
``I think everyone is just sort of sitting back and licking their wounds,″ said Roger Chapin, foreign exchange manager at Bank One Columbus, a major regional bank in Columbus, Ohio.
Others expressed reluctance to trade dollars ahead of a Thursday report to Congress by Federal Reserve Chairman Alan Greenspan on the health of the economy. His remarks could shed light into whether the Fed may raise interest rates at its Aug. 20 policymaking committee meeting.
As of 4 p.m. in New York, the dollar traded at 1.4857 marks, up from its 3 1/2-month low of 1.4806 Tuesday. The dollar also traded at 108.68 yen, down from 109.25 Tuesday. The British pound cost $1.5455, down from $1.5595.
Traders partly attributed the dollar’s strength in Europe to remarks by Ernst Welteke, a member of the German Bundesbank’s policy-making Central Bank Council, who told the VWD news service that a higher dollar would help Germany’s competitiveness. A more expensive dollar benefits German exporters by making goods denominated in marks more affordable.
The dollar also derived strength from weakness in the British pound, which sold off in Europe after the government released minutes of the June monetary meeting between Chancellor of the Exchequer Kenneth Clarke and Bank of England Governor Eddie George. It showed George had opposed the decision to cut interest rates by a quarter point to 5.75 percent last month.
Peter Wadkins, a vice president at the New York branch of Britain’s Standard Chartered bank, said traders sold the pound on the news because ``it gives them the feeling that the central bank and government can’t coordinate policy. From that perspective, it shows weakness.″
The dollar weakened against the yen after a leading Japanese business executive, briefing reporters on his meeting with Prime Minister Ryutaro Hashimoto, hinted that higher interest rates loom in Japan.
Japanese rates have been at historic lows since last year to help combat economic weakness. But there has been speculation that Japan’s central bank will raise rates, perhaps in coordination with the Fed if it nudges up rates next month.
Jiro Ushio, chairman of the Japan Association of Corporate Executives, told reporters it was possible that the Japanese could increase rates before the Fed’s Aug. 20 meeting. Higher rates would make investments denominated in yen worth more.
``The rate hike rumors in Japan are becoming a bit more frenzied, so the yen is a bit more perky on the back of that,″ said Lisa Finstrom, a currency analyst at Smith Barney Inc. in New York.
Other late dollar rates in New York, compared with late Tuesday: 1.2121 Swiss francs, down from 1.2152; 5.0325 French francs, up from 5.0240; 1,520.00 Italian lire, up from 1,514.25; and 1.3619 Canadian dollars, down from 1.3693.