Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 1, 1995 TAG: 9506010071
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The coordinated dollar buying by the United States and other major industrial countries raised the dollar's value against both the Japanese yen and the German mark, stabilizing the currency after a steep slide last week.
This success helped to push the Dow Jones industrial average up by 86.46 points to a record 4,465.14. It was the biggest one-day gain since Dec. 23, 1991.
The dollar purchases were kicked off by the Federal Reserve, which acts as the U.S. government's agent, shortly after 8:30 a.m. Other countries joining in were Japan, Germany, Britain, France, Canada, Italy, the Netherlands, Sweden, Belgium and Switzerland.
Traders estimated that the Fed spent $1 billion to buy dollars and the other nations added another $1 billion in the first joint intervention to bolster the dollar since April 5.
The effort was far more successful than three other attempts this year. In late-afternoon trading in New York, $1 was buying 84.44 yen, up from Tuesday's close of 82.79 yen, and 1.4130 German marks, up from 1.3880 marks.
In announcing the intervention, Treasury Secretary Robert Rubin left no doubt that the United States and its allies were prepared to launch further ambushes in an effort to make traders wary about continuing to bet against the dollar.
But economists cautioned that it was far too soon to declare an end to the dollar's troubles despite the rare government victory.
The dollar is still down 15 percent against the Japanese yen since the beginning of this year and down 9 percent against the German mark.
Many economists forecast continued downward pressure on the dollar, given America's worsening trade deficit and uncertainty over whether the Republican-controlled Congress will be able to work with a Democratic president to produce an acceptable program to lower the federal budget deficit.
The twin deficits - in the budget and in trade - have been cited as the principal culprits in the dollar's troubles this year. The budget deficit translates into increased consumption and the trade deficit means more billions of unwanted dollars flowing into foreign hands.
Rubin said that the coordinated dollar purchases on Wednesday were consistent with the goals expressed by finance ministers and central bank presidents of the seven largest industrial countries when they met on April 25.
by CNB