Dollar Hits Another Low Against Yen : Markets: Global currency traders remain unimpressed by Bentsen comments. Dow off slightly; yields edge downward.
The U.S. dollar plunged to another record low against the Japanese yen Wednesday, highlighting the growing inability of the United States and other nations to block the will of the world’s vast and turbulent currency markets.
The day before, U.S. Treasury Secretary Lloyd Bentsen had proclaimed his support of the dollar in the strongest Clinton Administration statement to date on the greenback’s travails.
But the high-level remarks failed to impress speculators in the global currency bazaar, which handles an estimated $1 trillion a day. Traders in Asia, Europe and North America drove the dollar down against the yen, though not against other currencies.
“This is the first time we’ve seen such a successful, concerted attack on the dollar,” said Michael Metz, chief investment strategist at Oppenheimer & Co. in New York. “It’s rather terrifying.”
The dollar closed at 98.60 yen in New York, down from 99.95 on Tuesday, and at 1.5855 German marks, up from 1.5795. It closed in early-morning trading in Tokyo today at 99.07 yen, down 0.20.
U.S. stocks, meanwhile, had an up-and-down day, with the Dow industrials falling 2.59 points to 3,667.05 after having risen more than 20 points earlier in the day. Other stock barometers rose moderately, and long-term interest rates edged downward. Gold prices fell.
Most attention was on the dollar, however, in which losses were focused against the yen. Indeed, the dollar edged up against the Swiss franc, French franc and British pound, underscoring the strength of the yen and concerns about the U.S. trade deficit with Japan.
In a news briefing Wednesday, Bentsen repeated his statement of support for the dollar, saying, “We believe a stronger dollar is better for our economy and better for the world’s economy.”
However, analysts said the market was more interested in the political and economic realities that have prompted the continuing shifts in currency values. They also expressed doubt that the White House can muster the will or financial firepower to prevail over the currency markets.
“The problem is an issue of confidence--confidence in the Administration,” said David Solin, a partner at Foreign Exchange Analytics, a New York consulting firm.
Japan’s trade surplus with the United States, which is running in the $60-billion annual range, is increasingly being seen as a reason for the strengthening yen and weakening dollar. In addition, the Japanese have become less inclined to invest their profits in U.S. bonds than in the past, fearing inflation and rising interest rates.
Moreover, U.S.-Japanese trade issues remain unresolved, and the emergence of a shaky new Japanese government with a Socialist prime minister suggests that such issues will smolder for a long time.
“How can they come to the table and talk about trade and make great strides if politically at home it’s a mess?” Solin asked.
It was also unclear Wednesday how long it would take the political situation in Japan to sort itself out.
“We’re looking at two or three years of political uncertainty in Japan,” said Lawrence B. Krause, a professor at the Graduate School of International Relations and Pacific Studies at UC San Diego.
Investors are looking to two events next week for further clues to the dollar’s course.
The Group of Seven leading industrial powers is scheduled to meet in Naples, Italy. At the parley, global strategies to stabilize the dollar will be discussed.
An increase in short-term U.S. interest rates and a decrease in currently higher German rates, for example, would make American securities more attractive and stimulate demand for dollars.
The Federal Reserve Board makes the decisions on U.S. interest rates, and its Open Market Committee is to meet Tuesday.
The purpose of higher rates, which some experts think are unnecessary, would be to keep the U.S. economy on its current non-inflationary course and perhaps to change international sentiment about the dollar, which has lost about 10% of its value against the yen and mark this year.
The Fed has already raised interest rates four times this year, pushing up short-term interest rates 1.25 percentage points since February. Whether an interest rate increase would stabilize the dollar remains at issue.
“Look at all the increases we’ve implemented this year--and look at where the dollar is,” said Maria Fiorini Ramirez, president of a New York investment advisory firm.
On Wall Street, stocks traded solidly higher for most of the day, with the Dow rising more than 20 points, then falling back.
Still, analysts said the market held up well given the dollar’s record low against the yen. Winners topped losers by about 7 to 5 on the New York Stock Exchange, and most broad market indexes finished higher.
In the bond market, the yield on the Treasury’s 30-year issue eased to 7.51% from 7.52% on Tuesday.
U.S. markets may have been helped by strength in Europe. In London, the FTSE-100 index jumped 37.3 points to 2,946.3, its third straight advance despite global currency turmoil. In Frankfurt, the DAX average rose 28.04 points to 2,046.30.
Stocks in Mexico City also rebounded. The Bolsa index rose 38.70 points to 2,270.93.
Tokyo stocks finished lower, but their selloff was muted even as the dollar sank. The Nikkei index eased 158.23 points to 20,481.00.
Among U.S. highlights:
* Retail stocks paced the broad market’s advance, on expectations that sales are improving after a weak spring. Dayton Hudson jumped 2 to 81, Sears gained 1 to 47 7/8, J.C. Penney surged 2 to 52 3/4 and Ann Taylor was up 3/4 to 39 3/8.
* Among industrial stocks bouncing back, Nucor rose 1 7/8 to 71, Cummins Engine gained 1 1/8 to 43 1/8, Parker Hannifin added 7/8 to 42 1/2 and Dover rose 1 1/8 to 59 1/2.
* Some telecommunications issues were also strong. LDDS Communications jumped 1 1/2 to 16 3/4, General Instrument rose 1 1/2 to 57 3/4 and 3Com surged 1 3/8 to 51 1/8.
* STRAINED RELATIONS: Japan election results could hurt trade talks, economic reform. D2
