Dollar Declines to 18-Month Low
The dollar fell to a 18-month low against major foreign currencies Tuesday as efforts by the United States and foreign governments to drive down the value of the currency gained momentum.
Gold prices were little changed. Republic National Bank of New York said gold bullion was bid at $326.75 an ounce as of 4 p.m. EST, up 25 cents from the late bid Monday.
In its broad retreat, the dollar, as measured against 10 other leading currencies by the Federal Reserve Board’s trade-weighted index, fell to its lowest level since April 12, 1984.
Analysts said the dollar’s drop occurred in orderly markets and reflected continued pressure from rising foreign interest rates as well as traders’ reaction to remarks by Federal Reserve Chairman Paul A. Volcker that the nation’s monetary policy did not point to higher U.S. interest rates in the near future.
The Japanese government has indicated that it was tightening its fiscal policy in order to drive up domestic interest rates, in apparent continuation of the Sept. 22 agreement by the Japanese, the United States, West Germany, Great Britain and France to act jointly to drive the dollar down to reduce the U.S. trade deficit.
The daylong slide of the dollar against the yen reflected the Japanese efforts. At the close of business Tuesday in Tokyo, the dollar had dropped to 212.90 yen from 213.70 yen at Monday’s close. The dollar was quoted in London later at 212.50 yen, and it closed in New York at 211.995, down from Monday’s 213.26.
Jack Barbanel, a vice president for Gruntal & Co. in New York, said higher interest rates in Japan, and to a lesser extent in West Germany, indicated to traders that those governments were using fundamental economic measures to strengthen their currencies against the dollar, instead of simply selling dollars on the open market.
The British pound rose against the dollar, climbing to $1.4380 in London from $1.4270 on Monday. And later in New York, the pound rose to $1.44355 from Monday’s $1.4281.
Other late dollar rates in Europe, compared to late rates Monday, were: 2.6235 West German marks, down from 2.6425; 2.1528 Swiss francs, down from 2.1655; 7.9975 French francs, down from 8.0525; 2.9600 Dutch guilders, down from 2.9815, and 1,769.50 Italian lire, down from 1,783.75 1.3657.
Dollar rates in New York as of 4 p.m. EST, compared to late rates Monday, included: 2.6115 West German marks, down from 2.64025; 2.1395 Swiss francs, down from 2.16275; 7.9675 French francs, down from 8.04475, and 1.36425 Canadian dollars, down from 1.3668.
Mexico’s peso fell to a record low against the dollar, capping a feverish 25-day slide sparked by soaring inflation rates and the government’s decision to expropriate land to aid earthquake victims.
The peso dropped Tuesday to a rate of 470 pesos to the dollar, a fall of 30 pesos from Monday’s closing rate and a plunge of more than 100 pesos since the slide began Oct. 4.
