Newspaper article THE JOURNAL RECORD

U.S. Buys Up Dollars to Support Currency

Newspaper article THE JOURNAL RECORD

U.S. Buys Up Dollars to Support Currency

Article excerpt

WASHINGTON (AP) _ The United States aggressively bought dollars on foreign currency markets Wednesday in a temporarily successful effort to prop up the currency after it hit a postwar low against the Japanese yen.

The surprise rescue effort was accompanied by strong words of support from the Clinton administration and hints of even more aggressive efforts in coming days if traders don't stop battering the U.S. currency.

"I believe that recent movements in the dollar are inconsistent with the fundamentals of a strong investment-led recovery in the United States and the greatly enhanced ability of U.S. firms to compete around the world," Treasury Secretary Lloyd Bentsen said.

It marked the fourth time this year that the United States has intervened in the open market to purchase dollars. The effort Wednesday met with much greater success than the last attempt on June 24, when the United States joined in a massive intervention with 16 other nations, only to see the dollar fall lower.

This time, the dollar rallied after Bentsen's statement and the Fed's purchases. In late New York trading, $1 bought 97.60 yen _ up from a record low of 96.18 early in the session _ vs. 96.65 yen late Tuesday. The dollar also surged against the German mark, climbing to 1.5138 marks from 1.4949 Tuesday.

Private economists applauded the intervention and Bentsen's comments, saying they were long overdue.

"The administration is finally recognizing that it had to step in and fight the speculative sell-off of the dollar," said Allen Sinai, chief global economist at Lehman Brothers in New York. "The continued attack on the dollar was setting up shock waves that were making stock and bond markets unstable."

However, economists warned that the administration would have to do even more dollar-buying in the weeks and months ahead until financial markets saw a clearer sign that America's huge trade deficit was beginning to shrink.

Bentsen's statement hinted at more aggressive moves.

"A stronger dollar will reduce inflation pressures, improve American living standards and promote investments. We will continue to monitor developments closely in cooperation with our G-7 partners," he said in the statement. …

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