CURRENCY : Dollar Hits Lows Against Mark, Swiss Franc
The dollar continued its losing streak Thursday, falling broadly to achieve new lows against the German mark and the Swiss franc. It reached its lowest level in nearly nine years against the British pound.
Once again the dollar succumbed to expectations that the already sluggish U.S. economy will be further weakened by fallout from the tensions in the Middle East.
The dollar finished at a new European closing low of 1.5478 German marks, down from 1.5535 marks late Wednesday. The dollar fell further in later New York trading, declining to 1.5445 marks from 1.5575 late Wednesday.
The dollar’s previous lowest close against the mark had been 1.5485 marks, reached just last Friday in Europe.
Some West German dealers said they doubted that the dollar would go below 1.5400 marks after touching that level during trading Thursday. “I think the dollar is finished for the time being at 1.5400 after it tested that level several times during the afternoon but didn’t manage to break through,” said Wolfgang Grebe, currency dealer at Credit Lyonnais in Frankfurt.
But U.S. analysts were pessimistic about the dollar reaching bottom soon.
“Corrective upticks (for the dollar) are very limited, and people are viewing even the smallest corrections as selling opportunities,” said Pete Grant, a currency analyst with Money Market Services in Chicago.
“We would look for further declines in the dollar,” Grant said.
Iraq’s Aug. 2 invasion of Kuwait has sent oil and gasoline prices sharply higher, and economists fear that this will worsen American economic troubles. Traders believe that the Federal Reserve, faced with soaring inflation, is less likely to nudge U.S. interest rates downward to stimulate the sluggish economy.
Lower interest rates detract from the dollar’s value because it can’t compete with currencies of countries with higher rates.
Robert Hatcher, a corporate foreign exchange dealer with Barclays Bank PLC in New York, said the dollar probably will fall further unless central banks, including the Federal Reserve, decide that the U.S. currency has fallen far enough. However, there are no signs the banks are concerned about the dollar’s drop.
Despite its broad setback Thursday, the dollar did finish above its lows for the day. Traders said a report that durable goods orders rose 2.9% in July was three times larger than expected, suggesting to some that the economy may not be as weak as expected.
The dollar reached a new closing low against the Swiss franc, dropping in Europe to 1.2598 francs from 1.2735 late Wednesday and to 1.2560 francs in New York from 1.2775.
The previous low close was 1.2685 Swiss francs, set Dec. 31, 1987 in New York.
In London, the dollar fell to its lowest level since December, 1981, against the British pound.
The pound rose to $1.9515 in London from $1.9275 late Wednesday and to $1.9570 in New York from $1.9235. That was sterling’s highest close against the dollar since it was quoted at $1.9545 on Dec. 2, 1981.
On June 23, 1981, the pound reached $2.0014.
In Tokyo, the dollar fell to a closing of 145.88 Japanese yen from 146.92 yen at Wednesday’s close. Later, in London, the dollar was quoted at 146.38 yen, and in New York, the dollar edged down to 146.12 yen from late Wednesday’s 146.15.
Other late dollar rates in New York, compared to late Wednesday prices, included: 5.1855 French francs, down from 5.2390; 1,152.00 Italian lire, down from 1,162.25; and 1.12925 Canadian dollars, down from 1.13535.
DOLLAR RATES FOR MARK, POUND
The dollar fell to a postwar low of 1.5478 marks per dollar in Europe on Thursday and sank even further in New York trading. The British pound climbed to its highest point against the dollar in nearly nine years.
Los Angeles Times
Sources: Associated Press, Data Resources
