Weakens ahead of G-7 summit and on news of Euro stability pact
Jun. 16, 1997
NEW YORK (AP) _ The dollar ended mostly lower Monday, weakened by demand for yen ahead of the Group of Seven summit this weekend and signs that Europe's planned single currency may be stronger than anticipated.
The retreat stopped a two-day rise in the dollar after a six-day decline, but light foreign-exchange dealings exaggerated price movements and traders didn't read much significance into the currency's behavior.
Despite a lack of news to influence the dollar's value against the yen, orders for the Japanese currency increased because of anxiety that Japan's trade surplus will be a sensitive discussion topic at the G-7 meeting in Denver. The G-7 are Britain, Canada, France, Germany, Italy, Japan and the United States.
The summit starts Friday, one day after the Commerce Department releases its tally of April trade data, which is expected to show a sharp rise in Japan's exports to the United States. U.S. officials increasingly have complained about the surplus in recent weeks and partly blamed the dollar's strength against the yen for the imbalance.
``The market is wondering if the new news on the trade front will put further downward pressure on the dollar,'' said Audrey McNiff, vice president-foreign exchange at Goldman, Sachs & Co. in New York.
In New York, the dollar settled at 113.52 yen, down from 114.89 yen Friday. The dollar cost 1.7320 marks, down from 1.7386. The pound cost $1.6375, up from $1.6363.
The dollar's weakness against European currencies partly reflected the broad demand for yen on U.S.-Japan trade anxiety and a rally Monday in the Japanese stock market that pushed the benchmark Nikkei stock index to its highest level of the year.
But the dollar also was sold after European Union leaders meeting in Amsterdam, Netherlands, Monday approved an agreement on assuring stability in the euro, without granting any major concessions demanded by France to stimulate job growth.
Traders had bought dollars last week on speculation that French demands might result in a more flexible stability pact that would undermine the euro's rigid fiscal requirements and make it a weak successor to the mark, the predominant currency in Europe.
``This was a case of buy the rumor and sell the fact,'' said Stephen Jury, managing director of foreign exchange at the Union Bank of Switzerland in New York. ``People bought dollars on anticipation of an agreement. We did get an agreement and the dollar came off a bit.''
Although EU ministers agreed on a resolution aiming at stimulating job creation to satisfy the French, Germany's finance minister Theo Waigel said the stability pact's strict rules to enforce debt and inflation targets remained intact.
``Nothing is being relativized, nothing is being changed, nothing is being undermined,'' Waigel told reporters after the agreement was signed.
Other late-dollar rates in New York compared with late Friday: 1.4430 Swiss francs, down from 1.4440; 5.8400 French francs, down from 5.8670; 1,698.75 Italian lire, down from 1,709.00; 1.3866 Canadian dollars, up from 1.3842.