Dollar higher ahead as traders await Japanese stimulus plan
NEW YORK (AP) _ The dollar rose against other major currencies Tuesday, gaining vs. the Japanese yen after the government delayed the unveiling of its economic stimulus plan and preliminary details left traders unimpressed.
The U.S. currency also rose against the German mark on disappointing results of a survey on German business confidence. The dollar advanced against both currencies early but lost some of those gains after the Federal Reserve left interest rates unchanged.
``The real eyes are still on the Far East,″ said Ron Hudson, vice president of corporate sales at Royal Bank of Scotland. ``We’ve been waiting for something to come out of there.″
Dealings were quiet as traders awaited the plan to revive Japan’s ailing financial sector. Government disclosure of a proposed $6.5 billion tax cut and a recommendation to issue $77 billion in bonds to shore up troubled banks failed to surprise or encourage traders.
``This thing has been a bad secret for a couple of days now,″ said Dennis Heidt, a trader at Banque Paribas. ``I don’t think it was a real big mover.″
In late New York trading, the dollar was quoted at 130.78 yen, up from 130.68 late Monday. The dollar also was changing hands at 1.7822 marks, up from 1.7740.
Despite traders’ pessimism about the prospects for Japan’s economic recovery, Heidt said the early proposals seemed like a step in the right direction. He also lauded South Korea’s decision to allow its won currency to trade freely against the dollar, which boosted the won 12 percent Tuesday and could spur a recovery in neighboring currencies.
``Once that situation settles down, there will be a reverse trickle effect,″ Heidt said.
While the yen suffered against the dollar, it was higher against the mark, which was battered by a report that the widely watched Ifo index of western German business confidence slipped below analysts’ expectations. The report, which dimmed the prospects for a future German interest rate hike, also pushed the mark lower vs. the dollar.
The U.S. currency also gained against its German counterpart because it is generally stronger toward the end of the year and because of doubts regarding the strength of Europe’s planned common currency, said Hudson of Royal Bank of Scotland.
``We’re approaching 1998, the year of the euro, and that might be a period of instability,″ he said. Participating countries will be selected in 1998 for the new euro currency, which is slated for launch in 1999.
Other late dollar rates in New York, compared with late Monday: 1.4403 Swiss francs, up from 1.4318; 5.9645 French francs, up from 5.9404; 1,746.50 Italian lire, up from 1,738.50; and 1.4224 Canadian dollars, up from 1.4206.
The British pound was quoted at $1.6353, up from $1.6316.