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Dollar Remains Higher, Stocks Rebound

September 17, 1992

TOKYO (AP) _ The dollar remained higher against the Japanese yen Thursday morning as market players avoided risky European currencies, including the British pound. Share prices on the Tokyo Stock Exchange edged up.

The dollar ended Tokyo’s morning session at 124.75 yen. It opened at 124.83 yen, up 0.53 yen from Wednesday’s close, and ranged from 124.70 yen and 124.95 yen.

The 225-issue Nikkei Stock Average rose 189.68 points, or 0.11 percent, to finish the morning session at 18,134.38. The average, which fell 526.70 points, or 2.85 percent, on Wednesday lost more than 120 points earlier in the day.

The Tokyo Stock Price Index of all 1,139 issues listed on the first section recouped 4.75 points, or 0.35 percent, to 1,357.35. The broader TOPIX shed 30.51 points, or 2.21 percent, to 1,352.60 the previous day.

While dollar-yen trading remained relatively stable, European currencies were making hectic movements as investors increasingly feared for the health of the European Monetary System following a series of developments overnight in London, dealers said.

They said the dollar benefited as players shunned European currencies and sought a safe haven in the U.S. unit.

″Trading involving European currencies is almost chaotic,″ said Hirotaka Takeda, a dealer with Daiwa Bank.

Other dealers said the pound suffered heavy selling pressure earlier in the morning but stabilized as Tokyo players avoided further moves as an emergency currency meeting was being held in Brussels.

But the pound continued to fall in other Asian markets, including Singapore and Sydney, they said.

Takanobu Igarashi, a market economist at Sanwa Bank, said that the latest collapse in European currencies reflected widening imbalance between the German mark, continuously supported by Germany’s higher interest rates, and weaker currencies such as the pound, Spanish peseta and Italian lira.

″The key to determine the future of the situation is the Sept. 20 voting (on Maastricht agreement)″ in France, said Takanobu Igarashi, a market economist at Sanwa Bank.

Growing speculation that France may reject the unified Europe agreement, which would largely discourage hopes for the formation of the unified monetary system in Europe, is accelerating European currencies to collapse against the dollar and the yen, Igarashi said.

″In addition, the pound tended to be shunned in the first place because of Britain’s sluggish economy,″ he said.

Britain withdrew the pound from exchange-rate links with other European currencies Wednesday in an attempt to stop the currency’s fall in value.

The withdrawal from the European Monetary System was an effective devaluation of the pound, because it would be allowed to fall below limits set in relation to other European Community currencies.

Chancellor of the Exchequer Norman Lamont also said the government prime lending rate would remain at 12 percent.

The pound fell from $1.8695 in morning trading in London to $1.8083 in the afternoon. In New York, it fell to 1.7990 a half-hour after the announcement by the Treasury.

On the stock exchange market, prices initially fell as investors were discouraged by the collapsing European currencies, but rose back at mid morning when bargain hunters came in, traders said.

But the majority of players avoided significant moves until they see further developments in the European currency markets, they said.

The benchmark No. 145 Japanese government bonds were lower at 103.88 points by late morning from Wednesday’s 104.01-point finish. Their yield stood higher at 4.900 percent from 4.880 percent.

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