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Dollar Tumbles to Record Low, Stocks Slip

July 12, 1994

TOKYO (AP) _ The dollar plunged to another record closing low against the yen today, and worries about effects on Japan’s economy sent the Tokyo Stock Exchange’s main index lower for the fifth consecutive session.

The dollar closed at 97.07 yen, down 1.48 yen from Monday’s finish and lower than its overnight New York close of 97.75 yen.

Today’s close was the dollar’s lowest in Tokyo since modern exchange rates were set in the late 1940s. The previous low of 98.30 yen was set last Wednesday.

In the last month, the dollar has fallen a total of 7 yen, or 6.7 percent, setting record low closings in nine of 15 sessions.

It opened today at 97.35 yen and ranged between 97.05 yen and 97.53 yen.

Traders said the dollar was sold after a Japanese newspaper report quoted a U.S. official as saying the Group of Seven leading industrial nations have decided against money market intervention to support the dollar as long as it stays between 96 yen and 98 yen.

Nihon Keizai, Japan’s leading economic daily, quoted an unidentified U.S. official accompanying President Clinton in Berlin as saying officials at the weekend meeting of the G-7 in Naples, Italy, agreed that it was difficult to correct foreign exchange rates by coordinated intervention.

The market already had noted no strong commitment from the G-7 meeting to support the U.S. currency.

Japan’s central bank bought $500 million in efforts to stop the dollar’s slide, the Japan Broadcasting Corp. said. The Bank of Japan does not comment on its money market actions.

In a speech at an annual Japan-U.S. business conference, U.S. Ambassador Walter Mondale said recent exchange rate movements were not in line with U.S. economic fundamentals.

″A further weakening of the dollar is neither desirable nor justified,″ Kyodo News Service quoted Mondale as saying.

Bank of Japan Governor Yasushi Mieno, in Basel, Switzerland, expressed concern over the yen’s recent sharp rise, Kyodo said. Mieno was attending a regular monthly meeting of central bank governors at the Bank for International Settlements.

A central bank official said earlier today that the bank would do anything necessary to combat what he called speculation-driven dollar selling.

The strong yen hurts Japan’s export-oriented economy by making its products more expensive in foreign markets and reducing the yen value of dollar’s earned abroad.

″If the dollar goes to 95 yen, it will be terrible,″ said Toshiyuki Nakahara, an official of Matsushita Electric Industrial Co., a major Japanese consumer electronics maker.

Nakahara said that for every one yen the dollar falls, the Matsushita group losses 7.7 billion yen ($79.4 million) in profits.

A recent survey of 200 major Japanese companies listed on the Tokyo Stock Exchange showed that they expect pretax profit declines of 10 percent for the fiscal year ending next March 31, the Nihon Keizai said.

Toshihiro Nagata, deputy general manager of the treasury department at Sanwa Bank, said the dollar’s slide may continue until there is large-scale, coordinated intervention by the G-7 members.

Spot trading totaled $7.11 billion, up from Monday’s $4.54 billion.

Meanwhile, the 225-issue Nikkei Stock Average fell 72.61 points, or 0.35 percent, closing at 20,400.48. The average now has fallen a total of 433.89 points in five trading days.

The Tokyo Stock Price Index of all issues listed on the first section was down 9.01 points, or 0.54 percent, to 1,647.15. It had fallen 4.72 points, or 0.28 percent, to 1,656.16 the previous day.

An estimated 300 million shares changed hands on the first section, up from Monday’s 210 million. Declines outnumbered advances 764 to 228, with 174 issues unchanged.

Dealers said the yen’s strength against the dollar triggered some arbitrage selling, in which investors seek profits from price gaps between the spot and futures markets.

The price of the benchmark No. 164 10-year Japanese government bonds closed at 98.42 yen, up 0.39 yen from Monday’s close. Their yield slipped by 0.070 percentage point to 4.335 percent.