THE VOLATILE DOLLAR : Greenback Shows Some Bounce : Markets: U.S. currency comes back from record low against the yen. Investors take heart, with the Dow up 5.53.
The dollar surged against most major currencies Monday, rebounding from a record low against the Japanese yen during Asian dealings as sentiment grew that the currency’s decline has been overdone in recent weeks.
The greenback soared nearly 4 yen after hitting 80.15 yen in overnight Tokyo trading. The dollar’s jump was the biggest one-day rise since August, 1993. It came after the greenback had fallen 20% against the yen since the start of the year.
Currency traders finally took their profits on the yen Monday, giving the dollar a sharp boost. In late New York trading, the dollar had risen to 83.90 yen from the fresh postwar low of 80.15 yen in Tokyo. That compares with 83.70 yen late Friday.
“The dollar cannot keep on going down,” said foreign exchange director Tom Moore at American Express Bank, noting that an increasing number of traders now believe the dollar’s weakness versus the yen was overdone.
Central banks have intervened in the markets by buying dollars. Authorities have also tried to talk the currency up, but it was the market’s sense that the yen had soared too high that finally ended its move.
The dollar has been tumbling against the yen because of the huge U.S. trade deficit with Japan and, some economists say, because the U.S. budget deficit requires overseas investment to keep the government afloat.
So far this year, the dollar has lost about 10% against the German mark.
In late New York trading, the dollar was also stronger against the mark, settling at 1.4095 marks, up from 1.3775 late Friday.
U.S. stocks rose modestly, with investors encouraged by the dollar and lower interest rates, but trading was light. The S&P; 500 index rose 0.59 point to a record 507.01.
The Dow Jones industrial average rose 5.53 points to 4,198.15, with advancing issues narrowly outnumbering decliners on the New York Stock Exchange.
Technology stocks were among the day’s best performers, lifting the Nasdaq stock market amid optimism about first-quarter corporate earnings reports.
The dollar’s strong performance helped diminish concerns that the currency’s weakness would boost inflation by making imports more expensive and encouraging domestic producers to raise prices.
Inflation also can bring higher interest rates as bond prices move higher. That can make stocks less attractive relative to interest-bearing investments.
Still, neither stocks nor bonds made dramatic moves Monday. Traders said many investors were sitting out the session ahead of this week’s inflation data for March. Wholesale inflation numbers are due today and consumer price data on Wednesday.
“We won’t see much activity this week with the numbers coming out,” said Bill Allyn, managing director at Jefferies & Co. “The market will mark time until we have more evidence about what’s going on in the economy.”
Another factor keeping many investors on the sidelines, analysts said, was corporate earnings reports for the just-ended quarter.
The bond market appeared to focus largely on the domestic economy, continuing to pay little attention to the dollar weakness.
Ironically, the weak dollar has actually brought an indirect benefit to the bond market, according to Joseph Liro, chief economist for the securities firm S.G. Warburg & Co. Central banks have bought dollars, trying to stem the currency’s decline, then invested those dollars in short-term Treasury securities, supporting their prices, he said.
The yield on the Treasury’s main 30-year bond rose a bare 0.01 point from late Friday to 7.40%, and shorter-term securities were almost uniformly unchanged or slightly lower.
Among market highlights:
* Expectations of a strong showing for March earnings in the technology sector helped boost those issues, as did expectations of a strong book-to-bill report that, when released after the market close, indeed showed a higher rate of business activity.
Intel rose 1 3/8 to 88 1/2 on the Nasdaq, while Motorola rose 7/8 to 56 1/2 in NYSE trading.
* ALC Communications rose 3 to 36 1/4 in active Amex trading. Frontier Corp. agreed to acquire ALC for about $1.8 billion in stock. The merger will create the fifth-largest long-distance telephone company in the United States, with revenue of nearly $2 billion a year, Frontier said. Frontier fell 3 to 19 3/4.
* Teva Pharmaceuticals rose 2 1/2 to 33 1/2. On Friday, a Furman Selz analyst made positive remarks about the company’s earnings prospects.
* Stocks ended mostly lower abroad. In Tokyo, the 225-issue Nikkei average rose 2.8%, while in London, the Financial Times 100-share index lost 0.2%. Stocks fell 0.5% in Frankfurt and 1% in Paris.
* Clark Equipment rose 1 3/8 to 85 1/2 after it agreed to be acquired by Ingersoll-Rand for a sweetened bid of $86 a share.
* CONSUMER IMPACT
Factors other than weak dollar influence prices you pay. D2
