Dollar's Sharp Drop Pushes Bond Prices Down as It Prompts Fear Among Dealers
NEW YORK -- The U.S. dollar's sharp decline against other major currencies helped drive bond prices lower yesterday.</br></br>Actively traded Treasury bonds fell about three-quarters of a point, or around $7.50 for each $1,000 face amount of securities. Interest rates rose on short-term Treasury bills.</br></br>A renewed slump in the dollar might discourage foreigners from buying dollar-denominated securities, bond dealers fear. Moreover, the Federal Reserve System may be reluctant to ease credit conditions further if the dollar remains weak, they say.</br></br>Some traders, nervous about the outlook for the economy and interest rates, sold Treasury securities yesterday, taking profits amassed during the bond market rally earlier in the month, analysts said. Traders are worried that the dollar's weakness "could lead to some selling of Treasury securities by foreign investors," according to William V. Sullivan Jr., a senior vice president of Dean Witter Reynolds Inc.</br></br>Mr. Sullivan also said that many investors took to the sidelines, awaiting October trade figures, which are slated for release today. "No one wanted to take a big (investment) position in advance of the trade figures," he said.