Dollar Takes a Nose Dive Against Major Currencies Series: The Stock Market Crisis
The dollar took a nose dive on currency markets yesterday in reaction to a prediction by a prominent European official that the United States is ready to accept a further sharp decline in its currency to help stabilize its stock market.</br></br>This prediction by Jacques Delors, president of the European Community Commission, was swiftly denied by the Treasury Department, but not before the dollar plunged to a value of 1.7375 West German marks from 1.7695 marks and to 138.50 Japanese yen from 142 yen the day before.</br></br>"Let us not have any illusions," Delors said in an address to the European parliament in Strasbourg, France. "The Americans are prepared to let it {the dollar} fall to 1.60 {marks}, a level about 10 percent below the range that the major economic powers are believed to have agreed upon in February during a meeting at the Louvre Palace in Paris. "The Louvre agreements are going to suffer very much in the coming days. The Americans, who have been unable to get a commitment for more growth in Europe, will be putting pressure on {Europe} by reducing the rate of the dollar."</br></br>Delors also lashed out at the West German government, which he charged had "acted irresponsibly" in raising its interest rates just before the stock market's collapse. Higher interest rates in West Germany would slow its economy, hampering U.S. efforts to expand American exports and reduce the U.S. trade deficit-a major factor in the erosion of investors' confidence in the U.S. economy.</br></br>Delors said the Bonn government was not totally responsible for the worldwide collapse in stock markets, but that the West German government "lit the match" under already overheated markets.