Fed Buys Up Dollars After Yen Hits Record : Intervention: Administration also voices support for dollar as bond yields rise, stocks fall for a third consecutive day.

From Times Wire Services

The Federal Reserve bought at least a billion dollars in currency markets Wednesday, driving the dollar up from a post-World War II low against the Japanese yen and sharply higher against key European currencies.

Bond yields ended higher and stocks fell for a third consecutive day despite the Fed's support of the dollar.

The Fed's surprising move forced traders who were betting on the dollar's demise to purchase the currency. Most market participants had expected that the central bank would intervene only in the event of a disorderly dollar selloff that threatened to undermine the U.S. stock and bond markets.

While the dollar briefly touched an all-time intraday low of 96.10 Japanese yen, according to Reuters, dealers said the market was far from chaotic when the Fed stepped in.

It closed in New York at 97.60 yen, up from 96.65 Tuesday. The greenback also ended the day at 1.514 German marks, up from 1.495.

In contrast to the earlier failed dollar-rescue efforts, the move Wednesday was accompanied by strong words of support from the Clinton Administration and hints of even more aggressive efforts in coming days if traders don't stop battering the U.S. currency.

Treasury Secretary Lloyd Bentsen released a statement calling the dollar's recent slide "inconsistent" with the strong U.S. economy.

"A stronger dollar will reduce inflation pressures, improve American living standards and promote investments. We will continue to monitor developments closely in cooperation with our G-7 partners," Bentsen said.

Despite the dollar's strong move Wednesday after weeks of persistent weakness, most market participants said the intervention was unlikely to have any lasting impact given the bearish backdrop for the dollar, including the huge U.S. trade deficit, inflation concerns and sluggish securities markets.

"The things that have pushed the dollar down are still with us," said David Durst, vice president at Bear, Stearns & Co. "No amount of central bank intervention will change a currency's course for an extended period of time."

In the bond market, where the dollar's weakness has raised concerns that the Fed will have to sharply increase rates, prices were temporarily lifted off early lows on morning news that the Fed was massively supporting the dollar

But the fixed-income market eventually turned down again, partly on disappointment that the dollar failed to rally further after the Fed action.

Compounding negative bond sentiment, a Fed monthly report on regional economic activity showed further strength in the economy and reinforced inflationary worries among traders and investors.

By day's end, the yield on the Treasury's main 30-year bond rose to a new 2 1/2-year high of 8.09%, up from 8.06% late Tuesday. Its price, which moves in the opposite direction, dropped 11/32 point, or $3.44 per $1,000 in face value.

Meanwhile, in the stock market, where investors are concerned that the lofty bond yields will lure investors away from equities and into bonds, the Dow Jones average fell 26.24 points to 3,837.13, bringing the blue chip indicator's losses so far this week to nearly 94 points.

The Dow lost as much as 20 points early in the session, rallied 14 points in mid-afternoon as the dollar's value improved. But later the Dow and broader market drifted lower as bond yields failed to retreat.

Declining issues outnumbered advancers more than 4 to 3 on the New York Stock Exchange. Big Board volume totaled 333.24 million shares, up from 314.95 million on Tuesday.

Broad-market indexes outperformed blue chips, largely on the strength of rallying technology stocks. The NYSE's composite index fell 0.76 point to 255.98. The Standard & Poor's 500-stock index slipped 1.91 points to 466.51. The Nasdaq composite index of mostly smaller issues, slipped 0.37 to 771.82.

Among the market highlights:

* Semiconductor stocks rose after Goldman Sachs upgraded Cypress Semiconductor, citing good demand prospects for the static random access memory chip market. Cypress rose 1 3/4 to 22 1/2. Intel gained 1 1/8 to 62 1/2 and Cisco Systems was up 1 to 31 5/8.

* Software Spectrum jumped 3 to 15 1/2. Dean Witter upgraded the stock to buy after the company posted strong quarterly earnings.

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