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Dollar Down Vs. Mark, Up Slightly Against Yen

May 2, 1995

NEW YORK (AP) _ The dollar weakened against the mark and other key European currencies Tuesday, hurt by uncertainty over U.S.-Japanese trade talks and political anxieties in France that increased demand for the German currency.

The dollar ended marginally higher against the yen in U.S. trading, but currency dealers said the volume of dealings was so light that it was difficult to attribute the dollar’s behavior vs. the yen to any particular cause. A holiday-shortened week in Japan and Europe suppressed the level of transactions.

``The thin volume makes people very reluctant to take big positions,″ said Guillermo Estebanez, a foreign-exchange economist at Bank of America in San Francisco. ``There can be big costs if you take the wrong one.″

By late afternoon in New York the dollar fetched 1.3777 marks, down from 1.3905 at the same time Monday. The dollar also fetched 83.60 yen, up from 83.50 yen late Monday.

Traders said a primary focus of speculation in the foreign-exchange market was the U.S.-Japanese meeting in Vancouver, British Columbia, over the swollen Japanese trade surplus in automotive trade.

Automotive goods account for about 60 percent of Japan’s trade surplus with the United States. The surplus, which reached a record $66 billion last year, has been a key reason for the dollar’s 16 percent drop in value vs. the yen so far this year.

The surplus means Japanese exporters hold huge amounts of dollars that they must sell for yen in order to repatriate profits. That selling floods the currency market with dollars and reduces the value of the U.S. currency.

U.S. Trade Representative Mickey Kantor and Japanese Trade Minister Ryutaro Hashimoto were supposed to confer Wednesday, and many traders expected some kind of announcement.

A Japanese retreat on U.S. demands for more open access to Japan’s automotive market would benefit the dollar by alleviating the immediate threat of U.S. trade sanctions against Japan. A deadlock or collapse likely would send the dollar lower.

Despite outward intransigence on both sides, some traders said they believed the Japanese bargainers would reach a compromise because the dollar’s depreciation has made it increasingly difficult for Japanese exporters, whose U.S. profits result in far fewer yen when they’re repatriated.

``I know they have their honor and everything, and they’d like to go back woth some of their honor intact,″ said Jim Blackwelder, vice president of foreign exchange at NatWest Bank’s trading desk in Jersey City, N.J. ``But they’re going to have to come up with a market perception they’re giving a little bit.″

Nonetheless, traders acting on the possibility that the trade talks could fail sold dollars and purchased marks, now widely viewed as a safe-haven currency. That selling hurt the dollar’s value vs. the mark.

The German currency also derived strength from the political uncertainty surrounding the presidential runoff in France this weekend, which weakened the Franc and other key European currencies and indirectly hurt the dollar.

Traders said the latest economic data had no appreciable effect on the dollar. The Commerce Department said new-home sales rose 3 percent in March after plunging the month before, but the longer-term trend still showed the American economy is slowing down, consistent with other recent data.

Other late dollar rates in New York compared with late Monday: 1.1350 Swiss francs, down from 1.1460; 4.9110 French francs, down from 4.9525; 1,665 Italian lire, down from 1,669; 1.3580 Canadian dollars, up from 1.3558.

The British pound cost $1.6168 in New York, more expensive than its $1.6145 exhange rate late Monday.

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