Dollar falls as markets disappointed by G7, Dow losses
05:39 p.m Oct 05, 1998 Eastern
By Svea Herbst-Bayliss
NEW YORK, Oct 5 (Reuters) - The dollar fell against most major currencies on Monday after the world's leading economies this weekend admitted the global economic crisis was getting worse but failed to present a battle plan to revive growth.
Falling more than a full pfennig against the German mark and a full Japanese yen, the dollar mirrored stock market losses as the Dow Jones industrial average closed down 58.45 points, or 0.75 percent, at 7,726.24. Exchanges in Tokyo, Frankfurt, Paris and London all suffered heavy losses as well.
''The dollar's moves are in line with the Dow's losses,'' Commerzbank trader Greg Schwake said as dealers looked back on the weekend's lackluster Group of Seven statement and ahead to ongoing turmoil in Brazil, Latin America's largest economy.
''Financial market conditions have deteriorated in many parts of the world, leading to a further weakening of growth prospects,'' a G7 statement said on Saturday. Besides the United States, Germany, France, Italy, Japan, Canada and Britain also belong to the group.
But the G7 said nothing about interest rate cuts aimed at boosting global growth, perhaps because Germany and France signalled there was no room to manoeuvre three months before 11 European nations adopt a common currency and monetary policy.
''The markets were looking for a stronger statement and there is a sense that the group cannot reach any sort of solution,'' said Jeffrey Yu, senior dealer at Sanwa Bank.
Even as billionaire financier George Soros on Monday predicted the group would agree to coordinated rate cuts after all, he echoed traders' concerns by noting that easier monetary policy, alone, will not be enough to end the global crisis.
In late trading, the dollar stood at 1.6345 marks, down from Friday's 1.6460 mark close and slipped to 134.45 yen from 135.50 yen on Friday.
After seven years of robust growth, dealers expect U.S.
growth will begin to slow while European growth may just be picking up. ''There are so many things weighing on the U.S.
economy right now that some people simply think growth will grind to a halt in six months, leaving the dollar nowhere to go but down,'' Yu said.
Even reports that Japan's banking system was short of capital and in far deeper trouble than had been previously reported failed to prop the dollar against the yen, dealers said, admitting they were more worried about Latin America.
Brazil's markets trembled on Monday with the main stock index closing down nearly 4.5 percent as investors worried the nation may still require an expensive international bailout.
In other trading, the British pound fell to $1.6830 from $1.7008 as dealers expect Britain may cut interest rates this week. The dollar slipped to 1.3418 Swiss francs from 1.3563 but rose against the Canadian dollar to C$1.5565 from C$1.5447.
Copyright 1998 Reuters Limited. |
