JAPAN’S RATE CUT : How It Rates : FINANCIAL MARKETS : Dollar and Dow Both Rise as U.S. Welcomes Rate Cut

The dollar, which had sunk to record lows against the Japanese yen, on Friday climbed to its highest level since January after Japan slashed a key interest rate and U.S. Treasury Secretary Robert E. Rubin hinted at more coordinated efforts to boost the U.S. currency.

The Bank of Japan announced Friday in Tokyo that it was halving its 1% discount rate to the lowest level ever for any industrialized country.

The Japanese stock market soared on the announcement. The benchmark 225-share Nikkei average surged, ending up 658.37 points, or 3.74%, at 18,279.55 on the highest volume so far this year.

The dollar briefly climbed above the 100-yen level before retreating in later European and U.S. trading. Still, the dollar ended higher for the day, finishing in New York at 99.70 yen compared to 98.98 late Thursday.

“This was a significant admission by the Bank of Japan that the Japanese economy remains in difficult straits with a beleaguered banking system in need of massive rate relief,” said Allen Sinai, chief global economist at Lehman Bros. in New York.

The move to cut the Japanese rate, which was taken in an effort to lift the country out of its four-year economic slump, was immediately welcomed by the Clinton Administration.

Rubin said in a brief statement that the credit easing should “help contribute to conditions that will promote a recovery in [Japanese] domestic demand, greater financial stability and a continuation of recent developments in exchange markets.”

The dollar’s strength and the prospects of a rate cut by the Federal Reserve Board helped to propel the U.S. stock market, sending the Dow Jones industrial average up 31 points to 4,700.72.

Rubin said the Japanese rate cut was in line with a strategy announced by the United States and the world’s six other wealthiest industrial countries on April 25 aimed at an “orderly reversal” of the dollar’s declines in foreign exchange markets.

By the end of the day, the price of the Treasury’s main 30-year bond rose 9/32 point, or $2.81 per $1,000 in face value. Its yield, which moves inversely from price, fell to 6.58% from 6.60% late Thursday.

The Dow’s showing reversed a 14.09-point loss Thursday. The Dow closed above 4,700 on Friday for the first time since Aug. 3.

Advancing issues led decliners by about 7 to 4 on the New York Stock Exchange, where volume was moderate at 317.27 million shares as of 4 p.m., down from 321.7 million on Thursday.

The American Stock Exchange’s market value index set its sixth consecutive record high, advancing 4.67 points to 547.39.

The NYSE composite index, which rose 1.14 points to 307.39, set a new high after falling Thursday.

Among Friday’s highlights:

* In the technology sector, IBM pared early losses and finished down 1/2 at 98 7/8, after dipping as low as 98 1/8.

* Micron Technology rose 2 1/4 to 89 7/8, recovering a loss of more than a point. In Nasdaq trading, Intel was up 5/8 at 65 5/8. Microsoft added 7/8 to 95 1/2.

* Banking stocks rose following a Business Week report that First Interstate may be acquired by Wells Fargo.

First Interstate shares rose 3 3/4 to 100 1/8 and Wells Fargo stock was up 1 5/8 to 186 7/8.

In London trading, the FTSE-100 index of leading stocks closed up 8.9 points at 3,554.5.

In Mexico, the Bolsa index advanced 11.63 points to end the week at 2,622.21 points.