Dollar Drops After Vote on Trade Measure
The dollar fell sharply against the Japanese yen and moderately against other major currencies in U.S. trading Wednesday after the House passed an amendment to a trade bill that would force Japan and other nations to slash their trade surpluses or face tough sanctions.
Gold prices were mixed, falling in New York after moving higher in Europe. Republic National Bank in New York at 4 p.m. EDT quoted gold bullion at $450.50 an ounce, down from $451.75 late Tuesday. Silver prices were higher.
Dealers said the dollar was down for most of the session in a narrow trading range on rumors that the trade proposal would be passed. But when the late-afternoon House vote took place, the dollar fell even further.
Dan Holland, assistant vice president at Discount Corp., said the dollar tumbled as much as 1.75 yen in less than two hours.
Falls Against Yen
“It (the House plan) was viewed as a negative because it will probably mean some retaliation from the Japanese,” Holland said.
In London, the dollar traded at 140.90 Japanese yen. Later in New York, the dollar stood at 138.95 yen, down from 140.10 yen late Tuesday.
The House amendment, proposed by Rep. Richard A. Gephardt (D-Mo.), would require Japan and other nations with large trade surpluses with the United States to reduce those imbalances by 10% a year or face retaliation. The amendment was attached to a sweeping trade bill being considered by the House.
The action came as Japanese Prime Minister Yasuhiro Nakasone flew to Washington to confer with President Reagan on escalating trade tensions.
Besides Japan, countries that could be affected include West Germany, Taiwan, South Korea, Italy and possibly Brazil.
Holland said a statement from Reagan following the amendment’s passage did little to help the dollar. Reagan said a further decline in the dollar could be counterproductive, a comment virtually identical to one made last week by Treasury Secretary James A. Baker III and repeated Monday by presidential spokesman Marlin Fitzwater.
“The market was hoping for something a bit stronger. It’s going to be difficult to stop the dollar from declining just on rhetoric alone,” Holland said.
The dollar was mixed in more subdued trading in Europe. Foreign exchange dealers attributed the lack of activity to the closing of Japanese markets Wednesday for a national holiday.
The British pound edged up to $1.6565 from $1.6525. Later in New York, sterling fetched $1.6225, down from $1.6560 late Tuesday.
Other late dollar rates in Europe, compared to late Tuesday’s rates, included: 1.7950 West German marks, down from 1.7990; 1.4790 Swiss francs, up from 1.4677; 6.0000 French francs, up from 5.9925; 2.0270 Dutch guilders, up from 2.0265; 1,288.00 Italian lire, up from 1,283.50, and 1.3345 Canadian dollars, down from 1.3348.
Late Rates in N.Y.
Late dollar rates in New York, compared to late Tuesday’s rates, included: 1.7885 West German marks, down from 1.7958; 1.4675 Swiss francs, down from 1.4685; 1.33745 Canadian dollars, up from 1.33515, and 5.9665 French francs, down from 5.9880. Italian lire rates were unavailable.
In London and Zurich, gold rose to $451.50 an ounce from late Tuesday’s bids of $449 in London and $447.50 in Zurich. Earlier in Hong Kong, gold fell to a closing bid of $450.48, down from $452.63. At the New York Commodity Exchange, gold for current delivery closed down $1.20 at $451.
Silver jumped to $7.90 an ounce from $7.75 late Tuesday in London. On New York’s Comex, silver for current delivery rose 26.5 cents to close at $7.913.
