Dollar Declines After Remarks by Baker on TV

The dollar moved sharply lower in early trading Monday after U.S. Treasury Secretary James A. Baker III said in a television interview that the currency’s 18-month decline has been orderly and moderate.

Soon after the Baker comments, made during an overnight U.S. program, the dollar fell sharply to 1.8090 West German marks, down from 1.8295 marks at Friday’s New York close.

The dollar ended the day at 1.8175 marks in Europe. U.S. markets were closed due to the Presidents’ Day holiday.

Baker said that, except for a few periods several weeks ago, the dollar’s recent decline had been orderly and moderate. “Suffice to say, what has happened thus far to the United States dollar does not constitute a free fall.”

Inflation Concerns

But he conceded that, if it were to fall too far and too fast, it could reignite domestic inflation.

Other traders said the U.S. currency would probably stay in a narrow range until Thursday, when revised U.S. fourth-quarter gross national product figures are released and U.S. Federal Reserve chairman Paul A. Volcker is scheduled to testify before a congressional committee.

“Volcker has a propensity to give an entirely different view of the dollar than Baker,” said one dealer, adding that this could put upward pressure on the U.S. currency.

The dollar followed a similar course against the Japanese yen, closing at 153.55 yen, down from 154 yen Friday. Earlier in the day, it fell to 153.10 yen.