Dollar Expected To Remain Firm In Coming Week
The U.S. dollar should remain strong this week, barring a major intervention by the West German central bank, analysts said.</br></br>Despite declining interest rates, which normally make the dollar less attractive, and indicators that point to a weakening U.S. economy, the dollar rose last week against major foreign currencies. Traders ignored the Federal Reserve Board's 0.5 percentage point cut, to 8.5%, Wednesday in its discount rate, the widely watched charge for loans to financial institutions. "The divergence between the foreign-exchange and credit markets continues," said Leslie Puth, assistant secretary at Irving Trust Co.</br></br>"The credit markets have been trading on immediate news, while currency markets are focusing on the federal budget deficit and its future implications," Ms. Puth said. She added that, though the economy in the current quarter looks weak, most currency traders expect economic growth to rebound during the first quarter of next year.</br></br>Although trading was curtailed by holidays last week, traders said there was persistent demand for dollars. "Major corporate customers in both the U.S. and Europe, who had sold dollars earlier in the week, were buying them back up," said Ronald H. Holzer, assistant vice president and chief dealer for Harris Trust & Savings Bank in Chicago. "In the face of a weakening economy, many had sold anticipating the dollar to fall."</br></br>But the dollar continued to firm last week, withstanding even repeated interventions by the West German central bank on behalf of the mark. On Friday, the dollar stood at 3.0363 marks, up from 2.9710 marks a week earlier.