Rise in Interest Rates and Dollar's Plunge Set the Stage for Critical Week in Markets --- U.S., Allies Expect Attack On Currency and Pledge To Defend 7-Nation Pact
The U.S. and its major economic allies are bracing for a market onslaught on the dollar early this week that could determine the fate of the Feb. 22 currency-stabilization accord they renewed Wednesday.</br></br>In response to repeated attacks on the dollar Thursday and Friday, finance ministers of seven major industrial nations warned in separate statements that they intended to defend their currency pact vigorously if such action continues. On both days, central banks intervened heavily to help stem the dollar's decline.</br></br>Foreign exchange traders, meanwhile, indicated that the selling pressure will continue.</br></br>U.S. Treasury Secretary James Baker, in a speech Friday to the Interim Committee of the International Monetary Fund, said, "The U.S. and the six major industrial countries are fully committed to implementing our undertakings in these agreements." The other nations are West Germany, Japan, Britain, France, Italy and Canada.</br></br>The seven, Mr. Baker said, are committed to carrying out policy changes promised at their meetings last week and to intervening as needed to keep exchange rates near current levels.