Dollar Regains Ground Lost in European Trading

The dollar rose against major currencies in Europe on Friday to recoup some of the losses it suffered when the U.S. Federal Reserve made a half-point cut in the discount rate Thursday.

The dollar climbed to 1.518 German marks from a 1992 low of 1.4995 Thursday. It rose to 124.85 Japanese yen from 124.65. The pound was $1.907, less expensive than Thursday’s $1.918.

Trading was light Friday because U.S. markets were closed for the Independence Day holiday.

Some analysts said the dollar may stay above 1.5 marks and 1.24 Japanese yen if the Group of Seven fails to call for further strength in the yen. G-7 leaders, meeting in Munich next week, are expected to endorse a stronger yen to try to reduce Japanese trade surpluses, traders said.

Even so, many experts said the dollar’s rebound will be temporary because short-term German interest rates hold such a premium to U.S. rates, the U.S. recovery is fading and American officials are showing benign neglect toward the dollar’s losses. Short-term German interest rates are more than six points higher than U.S. rates.

The U.S. presidential election will add another element of political risk to the dollar, traders and analysts added.

The dollar fell Thursday after a surge in U.S. joblessness prompted the Federal Reserve to cut the discount rate to 3.0%. At the same time, the federal funds rate was trimmed a half point to 3.25%.

Other late dollar rates in Europe, compared to late Thursday’s prices, included: 1.357 Swiss francs, down from 1.358; 5.107 French francs, up from 5.095; 1.711 Dutch guilders, up from 1.707; 1,149.50 Italian lire, up from 1,148.25, and 1.2025 Canadian dollars, down from 1.203.