CURRENCY : Report of West Germany’s Gain Spurs Loss for Dollar

A report that a weaker dollar had given a boost to the West German economy pushed the U.S. currency lower in foreign exchange Wednesday.

The report from a West German television station came as a surprise to the currency markets, traders said, because it had been widely assumed that the dollar’s decline against the West German mark had damaged that country’s export market.

But the report quoted West German Finance Minister Gerhard Stoltenberg as saying that the drop in the dollar had actually fostered price stability.

The news quickly reversed an upward drift in the dollar that had begun Tuesday.

In the television network interview, the finance minister reportedly said the impact of the falling dollar was limited to markets linked to the U.S. currency, which absorb only about 15% to 20% of West Germany’s exports.

Stoltenberg also reportedly said that increased domestic demand for goods and services was expected to counter a drop in exports.

“It opens the door to further dollar depreciation,” said Jeffrey Barry, treasurer for Hill Samuel International Banking Corp. in New York.

Trading in the currency market was described as choppy but more active than in recent days, which have been characterized by quiet, year-end book balancing.

In Tokyo, before the West German report hit the news wires, the dollar ended a five-day slide, closing at 127.60 Japanese yen. On Tuesday, it had dropped to 126.95 yen, its lowest since the late 1940s.

In late London trading, the dollar edged up to 127.70 yen, before slipping in New York to 127.075 yen from 127.60 late Tuesday.

In London, the British pound rose to $1.8330 from $1.8310 late Tuesday. Later in New York, the pound was quoted at $1.8355, up from $1.8295.

Other dollar rates in New York, compared to Tuesday, were: 1.6285 West German marks, down from 1.6315; 1.3250 Swiss francs, down from 1.3305, and 1.3081 Canadian dollars, down from 1.3092.

Late dollar rates in Europe, compared to late Tuesday, included: 1.6340 West German marks, up from 1.6305; 1.3333 Swiss francs, up from 1.3250; 5.5342 French francs, up from 5.5205; 1.8390 Dutch guilders, up from 1.8330; 1,203.75 Italian lire, up from 1,200.50, and 1.3100 Canadian dollars, up from 1.3062.

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