Dollar Declines as the Fed Chairman Speaks Out in Favor of Budget Accord
NEW YORK -- The dollar fell fast but not far after Federal Reserve Chairman Alan Greenspan told Congress that the budget package is credible and that its adoption "most certainly" would cause a decline in interest rates.</br></br>Failure to enact the agreement "would, in my estimation, be a grave mistake," the Fed chairman said.</br></br>The greenback would be hurt by softer U.S. interest rates because lower yields make dollar-denominated investments less attractive to investors. But yesterday's losses were limited because the dollar neared its record low against the mark and because market participants doubted that Mr. Greenspan would have his way. Passage of the budget agreement by the Senate and House is uncertain, and bond investors may not take as sanguine a view of the proposed spending cuts and tax increases as the Fed chief has.</br></br>The budget accord aims to take $40.1 billion off the federal budget deficit in fiscal 1991, and $500 billion over five years, through a combination of tax increases and spending cuts.</br></br>Late in the New York trading day, the dollar was quoted at 1.5425 marks, down from 1.5495 marks late Tuesday in New York. The dollar bottomed out at 1.5403 marks, nearing its record low of 1.5385 marks, set Aug. 27.