Ends lower in volatile dealings, first retreat in a week
NEW YORK (AP) _ The dollar hit its third straight 4 1/2-year high against the yen Thursday before falling sharply on fears of Japanese intervention and ambiguous comments by Treasury Secretary Robert Rubin about the U.S. currency’s surge.
It was the dollar’s first retreat in a week and reflected growing nervousness in the foreign-exchange market about how quickly the currency has advanced.
``There was a lot of dollar-buying going on and then it collapsed, which made for a whippy nervous market,″ said Dennis Heidt, a trader at Banque Paribas in New York. ``The underlying message was that maybe the dollar needed a little correction here.″
The dollar reached 127.14 yen in Asian dealings, the strongest since August 1992 and the third consecutive day it’s reached a new 4 1/2-year intraday high, before settling in new York at 125.65 yen, down from 126.77 yen Wednesday. The dollar settled at 1.7178 marks, down from 1.7245. The pound cost $1.6234, up from $1.6194.
Traders continued to bid the dollar higher early Thursday based on the same underlying themes that had carried the currency higher since last Friday: higher U.S. interest rates that make dollar-denominated investments worth more; economic weakness in Japan and Europe; and an apparent easing of U.S.-Japanese trade frictions following Rubin’s visit to Japan last week.
But a chorus of warnings from senior Japanese monetary officials wrenched the dollar down more than a yen from its high point. Finance Minister Hiroshi Mitsuzuka, senior finance official Eisuke Sakakibara and vice-minister Tadashi Ogawa said the dollar had risen too far too quickly. ``We are concerned about it and will take appropriate action when the timing is right,′ Ogawa told a weekly news conference in Tokyo.
The dollar stabilized at lower levels for awhile then began to rise again after Rubin said in an interview on CNBC television that the administration’s strong-dollar policy hadn’t changed and that the currency’s value reflected economic fundamentals.
But in what appeared to be deliberately vague comments meant to slow the currency’s ascent, Rubin also said he shared the Japanese concern about the dollar’s recent behavior, and that seemed to limit its rebound.
``The fundamental situation hasn’t changed at all, and that’s why investor appetite for the dollar is still good,″ said Kosuke Hanao, head of foreign exchange trading at the Industrial Bank of Japan in New York. ``But people have mixed feelings about Rubin’s comments.″
Later traders sold dollars on a report from Japan’s Quick Nikkei News Service quoting unidentified sources as saying the Bank of Japan was ready to intervene to sell dollars if the currency resumed climbing.
``This was a broadbased effort by the Japanese to jawbone the dollar down a bit,″ said Susan Stearns, director of foreign exchange at the Bank of Montreal’s New York branch. ``It’s jawboning, and ultimately saying you’re going to intervene, so we were having a kneejerk reaction to this.″
Other late dollar rates in New York compared with Wednesday: 1.4680 Swiss francs, down from 1.4780; 5.7785 French francs, down from 5.8020; 1,695.75 Italian lire, down from 1,700.00; 1.3934 Canadian dollars, up from 1.3898.