Dollar falls against mark on EMU uncertainty
NEW YORK (AP) _ The dollar fell against the German mark Monday as French President Jacques Chirac dissolved the National Assembly and ordered early parliamentary elections, heightening uncertainty about the establishment of the European Monetary Union.
Concerns about the plan for a single ``euro″ currency, which is to be launched beginning on Jan. 1, 1999, tends to help the mark, which is seen as a safe haven in times of European uncertainty.
The dollar also was hurt Friday on concerns about the monetary union, stemming then from reports that European Union officials had concluded Italy wouldn’t qualify under the EMU’s strict financial guidelines. Against the Japanese yen Monday, the dollar drifted lower.
In New York, the dollar settled at 1.6978 marks, down from 1.7119 marks on Friday. The dollar cost 125.31 yen, down from 125.88 yen. The pound cost $1.6353, up from $1.6332.
The big news event of the day was Chirac, who asked voters for a new mandate in support of his conservative coalition. He called for a first round of parliamentary balloting on May 25 and a June 1 runoff. The elections are about nine months ahead of schedule.
``People are afraid you’re going to move to a socialist government, which has raised some questions about how they proceed with the EMU,″ said Lisa Finstrom, a currency analyst at Smith Barney.
The possibility of delay in the monetary union benefits the mark, since the establishment of a single currency would eliminate the German currency from its current dominant position in Europe.
Political uncertainty led to technically driven trading, since the rallying mark pushed the dollar below some important support levels. Bouts of selling followed.
``A lot of the more medium-term dollar positions are being liquidated,″ said John Nelson, manager of foreign exchange trading at ABN-AMRO Bank.
Dollar activity was relatively quiet against the yen, with the main theme being concerns about its continued appreciation against the Japanese currency. In the past few weeks, the dollar has hit a 4 1/2-year high of 127.14 yen, in addition to a 3-year high of 1.7374 marks.
The worry is there could be intervention from Japan and the United States.
``You have rising concerns about where the dollar is overall,″ Finstrom said. ``That is being expressed by where the yen is against the dollar. It is firm.″
Other late dollar rates in New York, compared with Friday: 1.4425 Swiss francs, down from 1.4560; 5.7305 French francs, down from 5.7650; 1,691.00 Italian lire, down from 1,691.50; 1.3984 Canadian dollars, down from 1.3989.