Yen Hits New High; Dow Drifts Lower : Markets: With Europe in crisis, currency traders seek out the stability of the yen, even over the dollar.
The Japanese yen rose to a record high against the dollar Wednesday as investors fled the turmoil of Europe and sold off U.S. investments to pour money into Japan’s powerful currency.
Stocks also fell for the third straight session, and bond yields rose slightly after soaring Tuesday.
The yen ended at 120.15 to the dollar in New York trading, breaking through its previous record of 120.45 set Jan. 4, 1988. The dollar had ended Tuesday at 121.02 yen and fell as low as 119.50 in Wednesday’s session before recovering slightly.
Despite weak economic growth in Japan and a 2 1/2-year fall in stock prices and real estate values, the yen still looks more enticing than the dollar or European currencies, traders said.
Global markets have been unsettled by chaotic trading on the foreign exchange market, where between $500 billion and $1 trillion changes hands daily.
Europe has been rocked by wild currency fluctuations that have battered the British pound, Italian lira and Spanish peseta.
The action Wednesday moved into the French franc, which came under attack from speculators.
To keep the currency aligned with the German mark, central banks intervened heavily, and France jacked up interest rates. In U.S. trading, the dollar rose to 5.114 French francs from 5.105 the day before.
With Europe in crisis, currency traders seeking out the stability of the yen have pushed the Japanese currency higher against even the German mark.
In New York, the dollar ended slightly lower against the mark at 1.496 from the previous session’s 1.498 marks.
The British pound rose to $1.710 from $1.697.
The trigger for the yen’s rise was a comment by a top U.S. Treasury official, who said Washington was not worried about the dollar’s value against the yen.
“We haven’t been concerned about the dollar-yen exchange rate,” Treasury Undersecretary David Mulford told reporters at the International Monetary Fund/World Bank annual meeting.
Stocks
Stocks drifted to a small loss, extending Tuesday’s broad decline amid persistent uncertainties over the international interest rate outlook.
The Dow Jones average, down 39.98 points Tuesday, slipped another 2.16 to 3,278.69.
In the broader market, declining issues outnumbered advances by about 5 to 4 on the New York Stock Exchange. Big Board volume came to an estimated 205.40 million shares against Tuesday’s 187.03 million.
Analysts said buying interest was muted by continuing uncertainty over the worldwide outlook for interest rates and currency markets.
Domestically, they noted, investors have been kept off balance by both earnings worries and the election campaign.
Among the market highlights:
* Auto stocks, subject of negative comments in a Wall Street Journal article, were heavily traded. General Motors fell 7/8 to 32 1/8, and Chrysler lost 1 to 22 3/8, but Ford Motor rose 1/4 to 40 1/2.
* Point-plus losers among the blue chips included Coca-Cola, down 1 1/2 at 40 3/4; Goodyear, down 2 5/8 at 62 1/8, and International Paper, down 1 1/2 at 65.
* Coca-Cola dropped 2 1/2 points Tuesday when the company estimated no third-quarter growth in its international case sales.
* Black & Decker fell 3 1/8 to 16 1/8. The company said it expected third-quarter profit to be about even with its second-quarter earnings, citing disappointing sales in Europe.
* U.S. Surgical dropped 2 5/8 to 60 5/8, trading at new lows for the year as analysts continued to scale back their earnings estimates for the company. At its peak last winter, the stock traded as high as 134 5/8.
* The Limited fell 1 to 22 1/8 in active trading. A company official described the firm as cautious about its outlook for the remainder of the fiscal year that runs through January.
* Video Lottery Technologies plunged 10 to 14 in NASDAQ trading. The gaming commission in the Australian state of Victoria voted to remove the company from its approved list of manufacturers.
* In other NASDAQ activity, Healthdyne tumbled 4 to 10 3/4, and Home Nutritional Services fell 3 3/4 to 9. Healthdyne estimated lower than expected third-quarter earnings for both itself and Home Nutritional, in which it owns a 68% interest.
* On the plus side, Intel climbed 2 3/8 to 66 5/8 among the NASDAQ volume leaders. The company reported sharp increases in sales of its 486 microprocessor chips. The stock traded as low as 46 5/8 in late spring.
Overseas, stocks were slightly weaker in London, with the Financial Times 100-share index losing 5.5 points to close at 2,580.5.
In Frankfurt, the DAX index of 30 leading German shares was 7.49 points higher at 1,557.83.
The Tokyo stock market was closed for a national holiday.
Credit
Treasury bond prices ended mixed as the currency crisis in Europe again eclipsed domestic news.
The price of the Treasury’s main 30-year bond was down 1/16, or 62 cents per $1,000 face amount. Its yield, which rises when the price falls, was 7.48%, up from 7.47% on Tuesday.
Today’s downturn “has to do with the uncertainty and unsettled conditions in Europe, (which are) hardly resolved,” said Brian Fabbri, chief economist at Midland Montagu Securities Inc.
The federal funds rate, the interest on overnight loans between banks, was 3.063%, even with levels late Tuesday.
Commodities
Corn and soybean futures prices slipped Wednesday on the Chicago Board of Trade after a cold night in the Midwest passed without a killing frost and put to rest fears of a crop-damaging freeze this year.
On other commodity markets, wheat futures ended mixed; natural gas hit a record high; oil futures rose; cotton futures fell sharply; precious metals fell, and livestock and meat futures retreated.
Corn for December delivery dropped 1.50 cents to $2.13 a bushel, the lowest settlement of a near-term contract since Aug. 7. November soybeans slipped 1 cent to $5.385 a bushel.
The contract for October delivery of natural gas on the New York Mercantile Exchange expired at $2.743 per 1,000 cubic feet, representing a 9.7-cent gain and the highest price since natural gas futures began trading on the exchange in April, 1990.
The advance extended a rally linked to near-term supply worries caused by Hurricane Andrew’s damage to natural gas production fields in the Gulf of Mexico.
November natural gas rose 5.7 cents to $2.593, but contracts for delivery in December and beyond fell slightly.
In oil trading, November light, sweet crude oil rose 22 cents to $22 a barrel.
Precious metal futures fell on New York’s Commodity Exchange on profit taking, with October gold dropping 20 cents to $348.60 an ounce and September silver losing 2.9 cents to $3.799 an ounce.
* MAIN STORY: A1
