Dollar Continues Its Slide Against Germany’s Mark : Markets: Greenback suffers as traders worry that instability in Mexico will clip U.S. companies’ profits.

The dollar sank to a 28-month low against the buoyant mark Monday, as investors snapped up the German currency amid worries over Mexico’s financial instability.

Dollar trading in the United States was extremely thin because of the Presidents Day holiday, but traders still showed up after the heavy action overseas. The U.S. stock, bond and commodity markets were closed for the holiday.

Investors fled to the mark when Banco de Mexico unexpectedly drove up short-term interest rates by almost 10 percentage points in a bid to lure capital back into Mexico, which has suffered an investment hemorrhage since last December’s peso devaluation.

Traders fear Mexico’s problems could hurt the profits of U.S. companies and thus make the German economy look comparatively stable.

The dollar also hit a three-month low against the Japanese yen.

Dollar traders did not rule out a further slide if the thin market conditions trigger exaggerated price fluctuations.

Said one dealer at a U.S. bank in Frankfurt: “Everyone is looking for the dollar to fall more.”

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The dollar’s recent slide has led investors to worry that the Federal Reserve Board will have to raise interest rates again to protect the currency, which could stall economic growth in the United States.

The dollar plunged to 1.4710 marks on the Tokyo market at one point on Monday, its weakest rate since October, 1992. It later inched back up to 1.4750 marks. It had finished at 1.4805 marks Friday.

Despite the dollar’s fall, few dealers seemed to worry about concerted central bank intervention to support it.

“It would be OK for the Fed to intervene if the aim were to stabilize financial markets, but just to adjust currency levels would mean the Administration would face more bashing from Congress,” said Hidenori Takigawa, a manager at the Long-Term Credit Bank of Japan.

Concerted intervention last June failed and the dollar is now lower than it was when U.S. authorities acted alone to support it in November.

Takigawa said that the mark has risen even against the Swiss franc, a traditional safe-haven currency, which shows how much the market is being driven by the surge in the German currency.

Meanwhile, the peso strengthened on the Mexican rate hike. Mexican stocks, however, suffered as fears mounted that 50% interest rates could strangle Mexican businesses. The Mexican Bolsa stock index fell 63 points to 1,766.14.

The peso has plunged about 40% since Dec. 20, when the Mexican government announced it would no longer prop up its currency. Senior officials from Mexico and the United States continued Monday to hammer out details of a $20-billion aid package.

Elsewhere, gold rose while oil drifted lower on foreign markets. Most foreign stock markets fell with nervousness about the dollar’s slide and the near-34-point drop in the Dow Jones industrial average on Friday.

Among market highlights:

* Hong Kong share prices tumbled following the arrest in China on Friday of Zhou Beifang, head of the Hong Kong affiliate of China’s state-owned steel company and son of a close associate of Deng Xiaoping, on suspicion of financial improprieties.

The Hang Seng index, the Hong Kong market’s key blue-chip indicator, fell 136.27 points, or 1.7%, to close at 7,906.74.

* Aluminum led most base metals higher as Kaiser Aluminum & Chemical Corp., one of the largest U.S. producers, braced for a walkout, which began late Monday.

Three thousand members of the United Steelworkers of America, representing about 51% of Kaiser’s U.S. work force, walked off the job at five of its U.S. production facilities in Washington state, Ohio and Louisiana.

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