Newspaper article THE JOURNAL RECORD

Support Spurs Rally in Dollar; Economists Doubt It Will Last

Newspaper article THE JOURNAL RECORD

Support Spurs Rally in Dollar; Economists Doubt It Will Last

Article excerpt

WASHINGTON (AP) _ The dollar staged a strong rally Thursday following supportive comments from U.S. and German officials.

However, private economists predicted the rally would be short-lived unless governments act in a coordinated way to change interest-rate policies and correct huge trade imbalances.

The dollar has been under strong downward pressure over the past three months, falling to a 50-year low against the Japanese yen and also declining substantially against the German mark.

The decline accelerated last week after traders were disappointed by the results of the annual economic summit meeting involving President Clinton and the leaders of Japan, Germany, Britain, France, Canada and Italy.

However, the dollar staged a major rally Thursday on remarks by U.S. Treasury Undersecretary Lawrence Summers and Hans Tietmeyer, president of Germany's central bank.

The greenback jumped 1.7 percent against the mark and was up 0.8 percent against the yen in late trading in New York compared to Wednesday's closing prices.

Analysts said Summers comments, combined with strong hints Wednesday from Federal Reserve Chairman Alan Greenspan about the likelihood of higher U.S. interest rates, helped to trigger the rally.

Summers, delivering the Treasury Department's twice-a-year report on currency markets, said the administration believes any further decline in the value of the dollar would hurt chances for a global economic recovery while a stronger dollar against the mark and the yen would have "important economic benefits for the United States."

Summers said it would "restore the confidence in financial markets" that is critical for sustaining the recovery while boosting the attractiveness of dollar-denominated assets to foreigners.

He said the United States and the world's six other major economies _ Japan, Germany, Britain, France, Canada and Italy _ agreed "that a renewed decline of the dollar would be counterproductive to global recovery."

Currency traders read the comments by Summers and similar remarks Wednesday by Tietmeyer as signalling the potential for a new round of coordinated dollar-buying by the United States and its allies if the dollar weakens further. …

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