Dollar Continues to Fall During Asian Trading : Markets: The greenback’s renewed slide raises the specter of further turmoil for U.S. stocks and bonds.
The dollar fell further in Asian trading early today, while Japanese stocks defied Wall Street’s Friday gloom by rising again.
The renewed slide in the dollar--after its collapse Friday to all-time lows against the German mark--raised the specter of further turmoil in U.S. stock and bond markets today.
In Hong Kong early today, the dollar was trading at 1.423 German marks, down from the New York close of 1.429 marks on Friday.
Against the Japanese yen the dollar traded at 125.22 today in Hong Kong, versus 125.75 at Friday’s New York close.
The Friday dollar-mark figure, the lowest of the post-World War II era, was driven by a sudden surge of dollar-selling by currency traders who have lost faith in the chance of a strong U.S. economic recovery anytime soon.
Some analysts Friday attributed the dollar’s plunge to pessimism over President Bush’s acceptance speech to the Republican National Convention on Thursday, in which Bush offered only vague plans for tax and spending cuts to invigorate the economy.
The dollar’s drop helped propel a selloff in the U.S. stock market Friday, as the Dow Jones industrial average fell 50.79 points to 3,254.10, its second-biggest point drop of the year.
Some analysts fear that the Federal Reserve could be forced to raise interest rates to defend the dollar, should the sell-off continue. By raising rates, the Fed would make dollar-denominated bonds and other securities more attractive, potentially luring back capital to the United States and thus shoring up the dollar.
However, a rise in U.S. interest rates could also slam the still-weak U.S. economy, experts warned.
In reaction to Wall Street’s Friday plunge, the Hong Kong stock market dropped sharply early today. The Hang Seng index tumbled 76.15 points, or 1.4%, to 5,433.24 in morning trading.
However, Tokyo’s Nikkei index continued to rebound, rising 325.77 points, or 2%, to 16,542.65 by midday. The Nikkei now has rocketed 2,233.24 points, or 16%, since closing last Tuesday at 14,309.41.
The Tokyo market’s rise followed the Japanese government’s announcement late last Tuesday of a number of steps to bolster stock prices, including a provision to allow Japanese banks to defer reporting stock losses on their books until next year.
Sunday, the Mainichi newspaper in Tokyo reported that the Bank of Japan is considering a further reduction in the official discount rate by half a percentage point to 2.75% at the end of this month--a move that could further help the Japanese economy and stock market.
