Dollar Mixed as Currency Trading Calms : Market Overview

Relative calm prevailed in the currency markets, leaving the dollar mixed.

* Treasury bond yields fell, partly reversing a steep selloff earlier this week. The yield on the Treasury’s main 30-year bond, which falls when prices rise, was 7.41%, down from 7.48% Wednesday.

* Stock prices staged a mild rally, pulling out of a three-day slump with encouragement from bargain hunters.

Currency

In New York, the dollar was mixed in unhurried trading, with no significant economic news to push it. It closed at 120.55 Japanese yen, up from 120.15 yen Wednesday.

Overnight in Tokyo, it fell to 120.25 yen from 122.67 Tuesday.

The central banks of France and Germany managed for a second day to keep the French franc within European exchange rate guidelines. In U.S. trading, the dollar closed at 5.041 francs, down from 5.114 Wednesday.

Banks, businesses and investors who trade currencies have tried to push the value of the franc lower against the German mark. But their efforts have met with stiff resistance from central banks, which bought enough francs to keep the currency trading at levels required by the European Rate Mechanism.

The dollar closed at 1.485 German marks in New York, down from 1.501 Wednesday. In late trading in Europe, the dollar hit 1.484 German marks, down from 1.499.

Hillel Waxman, chief foreign exchange dealer for Bank Leumi Trust Co., said the dollar traded in a narrow range Thursday during the calm following the battering it took in recent days.

On Wednesday, the dollar plunged to a new low against the yen as investors sought a safe haven from the turmoil that has plagued European currencies.

“There is no economic news on which to give the dollar any strength,” Waxman said. “We are sort of stuck here.”

The British pound fell in New York to $1.706, down from Wednesday’s $1.710.

Credit

The price of the 30-year bond finished up 3/4 point, or $7.50 per $1,000 in face amount.

“This was simply an unwinding of the deterioration we saw earlier this week,” said Mike Moran, chief economist at Daiwa Securities America. “There was little on the fundamental front that would lead to this type of rally.”

The 30-year bond lost nearly 1 1/2 points Tuesday after an unexpected spurt in housing starts reignited fears of inflation and trouble continued to dog European currency markets. The long bond lost another 1/8 point Wednesday.

On Thursday, traders appeared to have decided that the selloff was overdone. Taking courage from a stable dollar and a morning report of increased unemployment benefits that indicated a sluggish economy, they bought bonds.

“People probably realized that it was an unwarranted decline earlier this week, and therefore it corrected itself,” Moran said.

The Labor Department reported that first-time claims for jobless benefits rose to 414,000 during the week ended Sept. 12. Analysts noted that the 15,000 increase, to the highest level in five weeks, was inflated by claims in South Florida and Louisiana related to Hurricane Andrew.

The market largely ignored a Commerce Department report that gross domestic product rose at an anemic 1.5% annualized rate in the second quarter, supporting some economists’ views that the economy remains weak.

The federal funds rate, the interest on overnight loans between banks, rose to 3.25% from 3.063% Wednesday.

Stocks

The Dow Jones average of 30 industrials, down 48.36 points in the week’s first three sessions, recovered 9.18 points to 3,287.87.

Advancing issues outnumbered declines 5 to 4 on the New York Stock Exchange. Big Board volume came to 187.96 million shares, against 205.40 million the previous session.

Analysts said investors were selective in their buying ahead of quarterly earnings reports.

“Third-quarter earnings season comes out next week, and it’s not going to be pretty,” said Ron Hill, an investment strategist at Brown Bros. Harriman.

James Andrews, equity trading manager at Janney, Montgomery Scott, said he expects stocks to trade in a tight range until companies begin to release earnings.

Share prices surged on the London Stock Exchange amid perceptions that Britain’s recession-ravaged economy will benefit from lower interest rates. The Financial Times 100-share average jumped 40.7 points to 2,621.2, the first time it has closed above 2,600 since June 16.

In Frankfurt, rumors of profit declines at major German companies, especially car manufacturers, hurt share prices. The 30-share DAX average fell 26.89 to 1,530.94 points.

Tokyo stocks ended firmer. The 225-share Nikkei average rose 327.23 points, or 1.79%, to 18,609.95.

Among market highlights:

* Blue chip gainers included Coca-Cola, up 5/8 to 41 3/8; General Motors, up 1 to 33 1/8; Philip Morris, up 1 to 86 1/4; McDonald’s, up 1/4 to 44 3/4, and International Paper, up 1 1/8 to 66 1/8.

* Prominent pharmaceutical issues, by contrast, posted broad losses. Merck, a component of the Dow, fell 1 1/8 to 45 5/8; Glaxo Holdings, 1/2 to 26 7/8; Syntex, 3/4 to 26 7/8, and Eli Lilly, 1/8 to 65 5/8. Abbott Laboratories was unchanged at 29 1/4.

* An exception among health care stocks was U.S. Surgical, up 3 3/8 to 64 after falling 2 5/8 Wednesday.

* Continental Corp. tumbled 6 1/8 to 24. The insurance holding company, adding up its losses from Hurricanes Andrew and Iniki, said it planned to withdraw from the reinsurance business and recommended to directors that the quarterly dividend be cut from 65 cents a share to 25 cents.

* Stride Rite climbed 3/8 to 18. The company reported earnings for the fiscal third quarter ended Aug. 28 of 40 cents a share, up from 36 cents a year earlier.

* Compania Cervecerias traded at 12 5/8 on the NASDAQ after an initial public offering of American depositary shares of the Chilean brewing company at 12 1/2.

Commodities

Platinum futures prices rose sharply as prospects dimmed for a weekend meeting between South African President F. W. de Klerk and black leader Nelson Mandela.

A Mandela-de Klerk summit is seen as crucial to reviving black-white talks on ending apartheid in South Africa, the world’s largest platinum-producing country.

On other commodity markets, natural gas futures fell sharply, leading other energy futures lower; grains and soybeans advanced, and livestock and meat futures were mixed. Platinum for October delivery jumped $7.90 to $373.70 an ounce on the New York Mercantile Exchange.

On New York’s Commodity Exchange, gold for October delivery gained 60 cents to $349.20 an ounce, and December silver rose 1.2 cents to $3.837 an ounce.

November light, sweet crude oil fell 21 cents to $21.79 a barrel on the New York Mercantile Exchange.

Market Roundup, D6