Dollar Sags As Traders Take Earlier Profits --- Speculation on Rate Cuts By U.S. and Japan Also Drives Currency Down
The U.S. dollar retreated yesterday as traders took profits from Wednesday's rally and speculated that interest-rate cuts by the West German, French and Dutch central banks will be followed by similar cuts today by the Bank of Japan and the U.S. Federal Reserve Board.</br></br>In anticipation of the West German Bundesbank's cut in its discount rate, or lending fee to financial institutions, to 3.5% from 4%, traders drove the dollar to 2.2715 West German marks in early European trading. Lower interest rates abroad would make dollar-denominated investments more attractive, increasing demand for the U.S. currency.</br></br>But by late New York trading, the U.S. currency had fallen back to 2.2413 marks, down from 2.2688 the day before, as profit-taking and expectations of Fed action dominated the market.</br></br>The dollar dropped to 179.50 Japanese yen from 180.93, and fell to 1.8930 Swiss francs from 1.9140. The British pound fell to $1.4408 from $1.4535.</br></br>In early trading in Tokyo Friday, the dollar rose against the Japanese currency to 179.55 yen from 179.50 in New York yesterday afternoon.