Analysts Seek Motives of Central Banks --- With Fed Inactive, Europe, Japan Aid Dollar
After weeks of sitting on the sidelines, European central banks intervened in foreign exchange markets Friday to slow the dollar's decline.</br></br>Now, traders and economists are trying to figure out what kind of message the central banks were attempting to send. And they're still asking themselves: Where's the U.S. Federal Reserve?</br></br>Suspicion is growing that major central banks are resigned to a continuing decline of the dollar but are reluctant to acknowledge it. Their major task now, in the view of several analysts, is to see that the U.S. currency's retreat stays orderly.</br></br>"Without some sign of a really determined, concerted effort to hold it, (the dollar) is going to go to new lows," the head of foreign exchange operations for a major U.S. bank said. "The Bank of Japan must accept the inevitability of a stronger yen. The Fed's interest . . . is just to make sure (the dollar) doesn't drop so fast that nobody buys their bonds."</br></br>Friday, the Bank of Japan sold yen to buy dollars in Tokyo trading, as it had been doing all week. Then during European activity, traders said, the West German Bundesbank, Banque de France and Swiss National Bank all intervened to support the dollar when it was trading at 1.8110 to 1.8130 West German marks. Market estimates were that the four central banks combined spent a moderate $400 million to $500 million.