FINANCIAL MARKETS : Dollar Rises on Hopes for Japan Accord
The dollar rose broadly Monday, posting one of biggest single-day gains against the Japanese yen this month, on optimism for a trade deal that will help cut the nagging U.S. deficit with Japan. Stocks closed mixed and yields were unchanged or nudged upward.
Across-the-board weakness in the German mark amid uncertainty about next month’s federal elections in Germany and the possibility of another U.S. interest rate hike today also helped advance the dollar, market participants said.
In the near term, a rate increase would boost the U.S. currency by making dollar-denominated deposits more attractive.
The dollar surged nearly a full yen in Europe on news that Japanese Trade Minister Ryutaro Hashimoto would meet in Washington with top Clinton Administration officials, seeking to head off U.S. sanctions in advance of a Friday deadline.
In London, the dollar rose almost a full yen to 98.63 yen from 97.65, ending the day even higher in New York at 98.85. The mark was at 1.5537 marks, up from 1.5480.
Stock prices closed mixed as investors geared up for today’s key meeting of the policy-setting Federal Open Market Committee, which could decide to boost interest rates for a sixth time this year.
The Dow Jones industrial average closed up 17.49 points at 3,849.24, but in the broader market, declining issues beat advances 1,137 to 977 on New York Stock Exchange volume of 271 million shares. The Nasdaq index ended down 1.83 at 755.63.
“Certainly the broad market direction is still down. Frankly, this could be a pretty wild week,” said John H. Shaughnessy, director of research for Advest Inc.
Many market strategists believed the central bank would postpone any action until at least next month, but several investment banks, including Goldman Sachs & Co. and Bear, Stearns & Co., predicted a rate hike.
“Once that’s out of the way one way or another, I think there’s a good chance the market may have a little bit of a bounce here,” said Walter Revis, market analyst at Principal Financial Securities.
The yield of the Treasury’s main 30-year bond rose to 7.79% from 7.78% on Friday.
The Standard & Poor’s composite index of 500 stocks rose 1.15 to 460.82. The American Stock Exchange index was off 1.45 to 453.78.
Among Monday’s market highlights:
* Investors dumped Micron Technology and Texas Instruments after a CS First Boston analyst lowered ratings to “hold” from “strong buy” reportedly because of pricing pressures in the market for dynamic random access memory chips.
Texas Instruments tumbled 3 3/4 to 68 1/4 and Micron dropped 2 to 36.
* Another big loser was Mercantile Stores, which plunged 16 3/8 to 38 3/4 on the NYSE after the retailer revealed that merger discussions were terminated with a “third party” it did not identify.
* CBS Inc. rose 3 3/4 to 340 5/8 and Capital Cities/ABC Inc. gained 1 3/8 to 82 1/4 on reports that Walt Disney Co. had lost interest in a deal for General Electric’s NBC network, analysts said. Disney may now turn its attention to CBS.
* A cold, dry winter in Brazil that has already hurt coffee is now hurting the orange crop. Orange juice prices soared to four-month highs Monday. The November frozen orange juice contract rose 4.4 cents to 99.35 cents a pound, the highest since June 3.
* Gold on New York’s Commodity Exchange fell $1.80 to $394.30 per troy ounce.
