Battering Of Dollar Hurts Bonds --- But Stock Prices Post Only Moderate Drop In Sluggish Volume
NEW YORK -- Central banks crushed the dollar's rise against key currencies, and bond traders reacted by dumping Treasury bonds. But stocks fell only a bit in light volume.</br></br>The Dow Jones Industrial Average closed 10.81 lower at 2649.55. The benchmark 30-year U.S. Treasury bond sank 1 1/8 points, or $11.25 for each $1,000 face amount, also in light trading.</br></br>Both markets felt the effects of sustained and coordinated dollar selling by central banks. By late afternoon in New York, the dollar fell a relatively sharp 1.1% against the West German mark and 0.7% against the Japanese yen.</br></br>U.S. dealers and investors bought dollars yesterday morning, following a round of intervention by foreign central banks during European trading. But in the afternoon, the Federal Reserve surprised traders by selling dollars in exchange for both yen and marks.</br></br>The Fed "came in aggressively," said Robert Ryan, manager of corporate foreign exchange at Bank of New York. "They started selling in marks and then in yen, and they knocked the dollar right down."