Hits new multiyear highs against yen, mark
NEW YORK (AP) _ The dollar hit a new 4 1/2-year high against the yen and a three-year high vs. the mark Wednesday, propelled by the allure of rising U.S. interest rates and lack of central-bank concern over the dollar’s strength.
It was the dollar’s fourth straight day of solid gains and the sheer momentum emboldened more traders to push the dollar higher, particularly when the currency surpassed its previous 1997 high of 1.7210 marks.
``You’ve got interest rate differentials working in the dollar’s favor pretty much around the world,″ said Ron Hudson, vice president of corporate sales at Royal Bank of Scotland in New York. For foreign investors looking for the best return, he said, ``you want to stick your money in dollars.″
The dollar hit an intraday high of 126.93 yen, the strongest since August 1992, before settling in New York at 126.77 yen, up from 126.52 yen Tuesday and up 3.4 percent since last Friday when the rally began.
Against the mark the dollar reached an intraday high of 1.7272 marks, the strongest since March 1994, before settling in New York at 1.7245 marks, up from 1.7143 Tuesday and up 2.3 percent since last Friday. The pound cost $1.6194, down from $1.6260.
The dollar has been rallying on a combination of stronger U.S. interest rates, continuing economic sluggishness in Japan and Germany and an apparent easing of U.S.-Japanese trade friction since Treasury Secretary Robert Rubin’s visit to Japan last week.
The U.S. currency also has been helped by growing optimism that Europe’s single currency will debut as scheduled in January 1999, displacing the mark as the predominant currency in Europe.
Traders bought dollars starting early in Asian dealings, encouraged by the lack of any official Japanese warnings over the yen’s decline. On the contrary, comments from senior Japanese monetary aides have suggested they aren’t overly concerned.
The influential head of the Finance Ministry’s international finance bureau, Eisuke Sakakibara, reiterated Wednesday that it’s desirable for foreign exchange rates to reflect economic fundamentals. But his remarks in a Japanese parliamentary hearing implied that intervention isn’t warranted.
``The Japanese haven’t been vocally intervening on behalf of the yen,″ said Robert Katz, a currency trader at MTB Bank Corp. in New York. ``That is almost a tacit green light from Tokyo that they’re not excessively worried about the yen’s movement.″
Others said Rubin’s visit to Japan last week may have marked the beginning of a new phase in dollar gains, despite the growing trade gap between the United States and Japan caused by the dollar’s strength.
Rubin said during his visit that he was impressed with Japanese efforts to stimulate Japan’s economy internally instead of through exports, and he expressed optimism over the country’s planned financial reforms. He also said countries shouldn’t use currency rates as tools in trade disputes.
``There is a growing perception in the market that Rubin has given them a reprieve to get their reforms in order,″ said Stephen Flanagan, a senior currency trader at Credit Agricole in New York.
Other late dollar rates in New York compared with Tuesday: 1.4780 Swiss francs, up from 1.4735; 5.8020 French francs, up from 5.7660; 1,700.00 Italian lire, up from 1,688.50; 1.3898 Canadian dollars, up from 1.3882.