A renewed show of support Thursday by the Clinton Administration for the beleaguered Mexican government sparked another powerful rally in the peso and in Latin American stocks in general, while U.S. stocks and bonds were weaker.
In foreign currency markets, some traders abandoned weaker Third World currencies for the dollar, while the dollar itself weakened against the German mark and Japanese yen--the world's two strongest major currencies.
Wall Street's reaction to the Clinton Administration's planned bailout for Mexico was subdued, with the Dow industrial average easing 3.03 points to 3,859.00 and broader indexes mixed.
In Latin markets, however, the response was euphoric: Mexico City's Bolsa stock index zoomed 90.95 points, or 4.5%, to 2,118.82. In Brazil, the Bovespa stock index rocketed 3,415 points, or 9.7%, to 38,406, while Argentina's Merval index shot up 10.4% and Chile's IPSA index leaped 4.5%.
In Brazil, traders said the bulk of the buying was by domestic investors and that foreigners were still mostly sidelined. Investors have feared that Brazil and Argentina could face the same kind of currency devaluation forced on Mexico in December, as worries about that country's economic outlook ballooned.
Meanwhile, key Asian stock markets suffered selloffs Thursday as some global investors pulled out, worried about Latin America's problems spreading. In Singapore, the Straits Times index tumbled 43.33 points, or 2.0%, to 2,102.36. In Bangkok, the SET index dove 41.35 points, or 3.2%, to 1,273.00.
The dollar rose against Third World currencies such as Thailand's baht, and it also gained against the troubled Canadian dollar, which hit a nine-year low at 1.418 per U.S. dollar.
But the greenback itself tumbled to a seven-week low against the Japanese yen and declined moderately against the German mark.
In New York, the dollar slumped to 98.65 yen, down from 100.00 on Wednesday and the lowest level since Nov. 29. It also fell to 1.529 marks, down from 1.537 and the lowest since Nov. 9.
Traders said the mark and yen gained from "safe haven" buying by investors who are looking for the strongest currencies in the wake of the Mexican debacle.
Analysts said some of the pressure on the dollar probably stemmed from concern that the Federal Reserve Board may delay its next increase in U.S. short-term interest rates due to Mexico's financial troubles. Some investors have been counting on another U.S. rate hike to restrain the economy and keep inflation in check.
Hence, the dollar's slide hurt U.S. bonds: The Treasury's 30-year bond yield finished at 7.87%, up from Wednesday's 7.83%.
In the stock market, some issues were hurt by fears that Mexico's problems might negatively affect the earnings of U.S. companies that do business in Mexico or rely heavily on selling their products there.
Among Thursday's highlights:
* U.S.-traded Latin issues rising included Telmex, up 5/8 to 36 1/4; Grupo Televisa, up 3/8 to 25 1/4, and the Argentina Fund, up 1 1/8 to 12 3/8.
* Citicorp slumped 1 3/8 to 39, despite reporting strong preliminary fourth-quarter earnings. Analysts and investors fretted about the long-term implications of Mexico's currency crisis, even after Citicorp said the effect on it would be minimal.
* Intel rose 7/8 to 67 1/8 and Advanced Micro Devices surged 3 1/8 to 31 3/4. The two companies said late Wednesday that they had settled all litigation against each other surrounding AMD's rights to sell clones of Intel's microprocessors.
* Gold stocks benefited from safe-haven buying by investors worried that Mexico's currency crisis could be repeated elsewhere. On New York's Comex, gold closed up $4.10 at $381.40 an ounce.
* Among gold mining stocks, Newmont Gold rose 5/8 to 35 1/8 and Battle Mountain Gold added 1/4 to 10.
Other foreign markets closed mixed. In Tokyo, the Nikkei average closed off 138.46 points at 19,410.01. London's Financial Times 100-share average fell 16.2 points to 3,033.2, while in Frankfurt, the 30-share DAX average ended up 10.22 points at 2,071.27.