CURRENCY : Moves by Bank of Japan Figure in Dollar’s Slide

The dollar closed sharply lower against other major currencies Thursday as speculators were frightened off by an unexpected firming of the Japanese yen.

But traders expected the dollar to continue to rise, although they said action could be limited before next week’s meeting of the Group of Seven industrial nations.

The dollar closed at 156.25 yen in New York Thursday, down from 158.70 Wednesday, and at 1.693 West German marks versus 1.711.

The dollar had fallen steeply overnight Thursday in Asia on intervention by the Bank of Japan. A New York dealer said the action was aggressive because it occurred as the dollar was already falling.

The yen also was bolstered by rumors, later denied, that Japanese officials were telling big investors to shun dollar-denominated assets.

Dow Jones News Service quoted officials at Japanese insurance companies as saying they are feeling pressure from the Finance Ministry to curb investment in dollar-denominated securities.

The Ministry “asked various insurance companies and perhaps trust banks to explain their investment strategy plans for the coming (fiscal) year,” said an official at one of the companies.

In New York, John Lynam, vice president of Security Pacific Bank, said, “There may be some reluctance to buy dollars and sell yen ahead of the G-7 meeting” on April 7. He expects the yen to stabilize between 155 and 158 to the dollar before the meeting.

In early trading in Tokyo today, the dollar had firmed to 156.90 yen.

Lynam said the general feeling is that “nothing has changed and interest rates will have to move higher in Japan.” He said the dollar has shifted into a new trading range of 1.68 to 1.70 West German marks, compared to a recent range of 1.70 to 1.72.

Thursday’s sharp rise on the German stock market helped spark renewed interest in the mark.

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