Dollar, Confounding Experts, Central Banks, Continues Rise; Governments' Efforts to Quiet Rally Fail
With economists at a loss to explain it and central bankers at a loss to control it, the dollar yesterday continued its rise on world currency markets, breaking through key trading barriers on its way to an 18-month high.</br></br>The rise came despite efforts by the United States, Japan and several other governments to quiet the rally by selling dollars on the foreign exchange markets. In Washington, the White House issued a statement declaring that a further rise could "undermine international efforts to reduce global trade imbalances."</br></br>One anomaly of the dollar's surge-and the mirror-image weakness of the Japanese yen and West German mark-is that it seems to fly in the face of common-sense economics: the currency of a country with major trade and budget deficit problems (the United States) is going up, while the currencies of key surplus countries (Japan and West Germany) are weakening.</br></br>But the exchange markets appeared undeterred, as traders seemed to "have the bit between their teeth," in the words of one investment banker. In European trading, the dollar zoomed through the psychological barrier of 2 marks to close at 2.01 marks, and through the reported target ceiling of 140 yen to close at 142.05 yen in New York.</br></br>Since low points at the beginning of the year, when the dollar dipped to 121 yen and 1.58 marks, it has risen about 18 percent against the yen and 28 percent against the mark.