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Dollar Drops, Stocks Fall

May 21, 1991

TOKYO (AP) _ The dollar slipped against the Japanese yen today, while Tokyo share prices inched down for the second consecutive day in thin trading.

The dollar closed at 138.15 yen, down 0.65 yen from Monday’s close of 138.80 yen and also below its overnight finish in New York of 138.50 yen.

After opening at 138.24 yen, it ranged between 137.97 yen and 138.33 yen. Spot trading totaled $5.85 billion, down from $6.89 billion Monday.

Junji Kitagawa, a dealer with Mitsui Trust and Banking, said the dollar eased in the afternoon as some traders adjusted long, overbought positions. On Monday, the dollar had gained 1.08 yen.

Kitagawa foresaw a range of 137 yen to 138.50 yen for the dollar for the time being in the absence of any fresh market-moving news.

Other dealers said many investors were shunning the exchange market because of uncertainties about the future of the U.S. economy and the direction of interest rates.

On the stock exchange, the Nikkei Stock Average of 225 selected issues shed 41.82 points, or 0.16 percent, closing at 25,481.21. On Monday, the index fell 178.91 points, or 0.70 percent.

Volume on the first section was estimated at 260 million shares, up from Monday’s 170 million shares.

The Nikkei index, which was down 166.58 points at the end of the morning session, narrowed its losses in the afternoon on rumors that Japan’s central bank would ease credit today, said Yuji Tobo, an analyst with Yamaichi Securities. The rumors proved unfounded.

″The rumors came up again and proved unfounded. ... Looking back at today’s activity, it was a lackluster day,″ Tobo said.

″There will be no other way than cutting the discount rate to buoy up the weakening stock market, though the market already has largely taken into account (such a cut),″ Tobo said.

Officials of the Bank of Japan have said the bank is watching the impact of rate increases over the last two years. After the bank raised its lending rate five times to combat inflation, it now stands at 6 percent.

In bond dealings, the price of the benchmark No. 129 10-year Japanese government bonds edged up to 98.80 points from Monday’s 98.72-point close. Their yield fell to 6.615 percent from 6.630 percent.

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