Massive Intervention Slows Dollar's Surge
After struggling for more than a week, central banks reined in the surging dollar by massive, concerted selling.</br></br>Traders estimated that the Federal Reserve Bank of New York and at least eight other central banks sold between $3 billion and $5 billion yesterday in a desperate attempt to stabilize the U.S. currency. The Bank of Japan alone dumped $800 million in Far Eastern markets, they said.</br></br>Noticeably absent, however, was West Germany's Bundesbank, which neither participated in the intervention effort nor raised a key interest rate as many traders had anticipated.</br></br>News that consumer prices in April rose 0.7% caused the dollar to jump up, because inflation would keep U.S. interest rates high. But when traders realized that mercurial food and energy prices made up most of the increase, the dollar quickly fell back.</br></br>Dealers conceded that yesterday's intervention may have bought the central banks some time. But they warned that if they don't see continued evidence of cooperative efforts -- especially in raising interest rates abroad -- foreign-exchange traders will seek to push the U.S. currency even higher.