Financial Markets : Dollar Spurts Ahead, but Wall Street’s Not Impressed
In its biggest single advance in 20 months, the dollar surged more than 2% against the Japanese yen Wednesday, following leading industrial nations’ expression of unhappiness with the U.S. currency’s decline.
On Wall Street, meanwhile, stocks and bonds overall closed little changed for a second day. Gold and silver prices tumbled, leading a broad decline in commodity prices.
The dollar jumped to 83.78 yen in New York, up from 81.93 on Tuesday and the largest one-day advance since mid-August, 1993.
While the Tuesday meeting of the Group of Seven industrial nations didn’t produce any concrete proposals for halting the dollar’s stunning decline this year, analysts said the expression of concern about the dollar was enough to give some traders second thoughts about betting on a renewed slide.
Also, dollar buying by the Bank of Japan and comments from a Bundesbank council member hinting at the possibility of another German interest-rate cut helped support the buck, analysts said.
“It makes you hesitate before hitting the sell button,” said Joe Francomano, a trader at Dai-Ichi Kangyo Bank in New York.
Bundesbank council member Hans-Juergen Krupp sparked talk that German interest rates may have further to fall when he said that the German discount rate (a base short-term interest rate), now 4%, was “not especially low” by historical standards.
Even so, the dollar failed to rally against the German mark. It fell to 1.361 marks in New York from 1.371 on Tuesday.
The G-7 finance ministers on Tuesday pledged to continue economic cooperation efforts that would stabilize currency markets. They deplored the dollar’s depreciation against the yen and mark this year, hinting that more aggressive counteraction might be planned.
On Wall Street, the Dow industrial average recovered from a mild morning selloff to close at 4,299.83, down 0.34 point.
But in the broader market winners edged losers on the New York Stock Exchange and most key indexes rose modestly. Another rally in red-hot technology stocks helped send the Nasdaq composite index of mostly smaller stocks up 5.63 points to 836.91, breaking its previous record high set April 13.
The bond market was surprisingly calm despite a report showing a pickup in durable goods orders in March--potentially a harbinger of a stronger economy.
The 30-year Treasury bond yield eased to 7.32% from 7.33% on Tuesday. And in an auction of new five-year Treasury notes, the average yield was 6.82%, lowest since last June.
Some bond players may be betting that the dollar is turning, which could bring a flood of foreign buyers into the U.S. bond market.
Bonds also may have been supported by lessened inflation fears, as commodity prices slid Wednesday. Gold, which had benefited this year while the dollar was under attack, fell $4.10 to $386.20 an ounce for May futures. Silver dropped 14.7 cents to $5.57.
The metals’ losses helped send the Commodity Research Bureau index of key commodities down 2.36 points to 234.26, its largest one-day drop in eight months.
Among Wednesday’s highlights:
* The broad market was again pulled up by technology stocks, which have been soaring all year. Intel leaped 1 3/8 to 99 5/8, Sun Microsystems gained 1 7/8 to 39 1/2, IBM surged 1 5/8 to 95 1/4, Scitex advanced 3 1/2 to 20 3/4 and Xerox jumped 6 3/8 to 125 3/4.
* Some airline stocks also rallied for a second day. Northwest surged 2 3/8 to 30 3/4, Delta added 3/4 to 62 and Continental gained 1/2 to 15 7/8.
* Many financial issues rose. Merrill Lynch rocketed 1 3/4 to 46, Wells Fargo gained 2 3/8 to 167 7/8 and SunAmerica was up 1 1/4 to 48 1/2.
* Some retail issues sparked to life. May Department Stores rose 3/4 to 35 7/8, Penney added 7/8 to 44 1/4 and Vons gained 3/4 to 20 1/4.
* Among the day’s losers, steel stocks dropped anew on worries about price cutting. Nucor sank 4 to 44 1/2, USX-U.S. Steel lost 1 1/8 to 30 1/4 and Bethlehem was off 5/8 to 14 1/8.
Foreign markets were mixed. Tokyo’s 225-share Nikkei share average shed 84.05 points to close at 16,826.49 while Hong Kong’s Hang Seng index dove 2.6% on fresh concerns about China’s future. But Frankfurt’s DAX average gained 22.54 points to 2,029.53 and London’s FTSE-100 index rose 11.3 points to 3,226.2.
Market Roundup, D8
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Greenback Rallies
The dollar made its biggest gain in 20 months against the Japanese yen Wednesday after leading industrial nations called for a stronger U.S. currency. The dollar in yen, weekly closes since June, 1994, except latest:
Wednesday, April 27, 1995: 83.78
Source: TradeLine
Interest Rates:
30-year T-Bond: 7.32%
1-year T-Bill: 6.18%
