U.S.-Led Campaign Fails to Shore Up Value of the Dollar; Decline of Currency Prompts Broad Sell-Off in Stocks, Bonds
For the second time in as many months, the United States led a coordinated effort by nations around the world to buy billions of dollars, but the campaign failed to shore up the value of the U.S. currency.</br></br>Troubled by America's rising trade deficit and enticed by increasingly favorable rates of return offered on investments abroad, global investors sent the dollar tumbling yesterday to 1.5865 German marks, its lowest level in more than a year against the German currency, and to 100.45 Japanese yen, which is near its postwar low.</br></br>The dollar's decline triggered a broad sell-off in U.S. stocks and bonds and heightened expectations that the Federal Reserve will vote to raise short-term interest rates for a fifth time this year at the next meeting of its top policy-making panel, the Federal Open Markets Committee, on July 5-6 in an effort to make the return on investments in the United States more attractive than those in other countries. {Details, Pages B1 and B2.}</br></br>The dollar's fall also indicates that financial markets have little faith in President Clinton's promise to keep the dollar strong. Traders and economists on Wall Street dismissed yesterday's effort - in which the world's central banks spent an estimated $3 billion to $5 billion - as ineffectual and poorly executed, and many accused the administration of failing to take more decisive action.</br></br>"I voted for President Clinton and I'm a defender of this administration, but I'm being clobbered every time I turn around by people who complain about {Clinton's} incompetence" in dealing with the markets, said an angry Scott Pardee, chairman of Yamaichi International (America) Inc. "I've been through this now too many times."